Customs Duty Exemption Available On Manufacture Lithium Ion Battery Captively Used To Manufacture ‘Power Bank’: CESTAT

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that there is no customs duty on lithium ion battery manufacture, captively used to manufacture ‘power bank’.

The bench of Dr. Rachna Gupta (Judicial  Member) and P.V. Subba Rao (Technical Member) has observed that from the raw material imported by the appellant at concessional/ exempted rate of customs Duty in terms of Notification No. 50/2017 dated 30.06.2017 has been utilised by them to manufacture Lithium Ion Battery (Accumulator) which has been captively used by them to manufacture ‘Power Bank’. Hence it is held that appellants have rightly claimed the exemption.

Background

The appellant/assessee is a manufacturer of Set-top Box, DVR/NVR, Reception Apparatus of Television, CCTV Camera, Lithium-ion Batteries/Power Banks, Populated PCB Mobile Charger/adaptors and sub-parts for use in manufacture of items mentioned above.

The Importer-appellant is registered with Export Promotion Circle, Delhi, Customs Preventive Commissionerate (Delhi) and are availing the benefit of S. No. 512 of the Notification No. 50/2017-Customs dated 30.06.2017, as amended. 

The Importer-appellant has furnished the prescribed bond as required under Customs (Import of goods at concessional rate of duty, Rules 2017 (IGCR Rules 2017) as prescribed by Notification No. 68/2017-Cus dated 30.06.2017, as amended.

Department observed that the Importer has imported various goods namely Housing Plastic, USB Cables, Lithium-ion Cell etc. after availing the benefit of S. No. 512 of the Notification No. 50/2017-Cus dated 30.06.2017, as amended, during the period of the year 2017-2019. 

The Importer-appellant has used all the imported items in manufacturing of Power Bank and thus violated the terms of the exemption Notification No. 50/2017-Cus dated 30.06.2017,entry at Sr.no. 512, as amended. 

Department observed that as per the aforesaid Notification, the exemption benefit is available for the parts, components and accessories except ‘populated printed circuit boards’ for use in manufacture of lithium-ion batteries other than batteries of mobile handsets including cellular phones falling under tariff item 8507 60 00.

It is alleged that the Importer-appellant has manufactured Power banks, which is a portable device comprising of rechargeable cells in a special circuit to control power having USB port/s etc. As per details submitted by the importer-appellant, the amount of total duty forgone on the parts imported by them, after availing the benefit of sr.No. 512 of the notification No. 50/2017-Cus dated 30.06.2017, as amended, is Rs. 8,12,95,799.

Department formed an opinion that Lithium-ion Battery and Power Bank are different. The Government of India, vide Notification No. 02/2019-Customs dated 29.01.2019 effective from 30.01.2019 vide serial no 17B allowed a concessional rate of 5% of Basic Custom Duty for Lithium-ion cell for use in the manufacture of Power Bank of Lithium-ion.

Thus, it is very explicitly that the intent of the Government of India to extend the benefit of concessional rate of duty to Lithium-ion Cell for use in manufacture of Power Bank was only on the issue of the aforesaid notification and not earlier. 

It is also clear from the notification that the Government has distinguishedLithium-Ion batteries and Lithium-Ion Power banks by extending the benefit for manufacturing the said products under two different entries/ serial numbers of the said notification. Therefore, it appears that both items namely Power Bank & Lithium Ion Batteries are different. As per department there was no need for the inclusion of two entries viz 17A & 17B in the Notification No. 57/2017-Customs dated 30.06.2017 also, as amended.

Arguments on Customs Duty on Lithium Ion Battery

The assessee contended that SCN has been issued after the notification no.02/2019 dated 29.01.2019 when in entry no. 17 B “powerbank” was mentioned for the first time. Hence during the period in dispute there was nothing called a Power bank. To HSN also it was only accumulators as good as battery were known.

The department contended that the demand was Rs 8.13 Cr. has been raised and affirmed along with the interest and penalty of Rs.8.13 Cr. by revoking bonds as were submitted at the time of import of the parts and components which actually are the parts and components for manufacture of power bank.

The appellants has availed the benefit of concessional customs duty by wrongly mentioning that imported parts and components have been used in manufacture of Lithium Ion Battery. Hence the benefit of availing nil rate of duty on those parts and components by invoking Notification No. 50/17 dated 30.6.2017 is nothing but an act of suppressing the important facts before the customs authority. Thus, the extended period has rightly been invoked while issuing the show cause notice.

Read More: Principal Bench Of Appellate Tribunal Empowered To Examine Anti-Profiteering: CBIC 

Conclusion

The tribunal while allowing the appeal held that though in terms of Notification No. 02/2019 dated 29.01.2019 distinguished Lithium ion Battery or Power Bank for the first time and based thereupon the demand of duty not paid by the appellant on the imported raw material/parts and components for the period January 2019 to June 2019 could have been demanded. The show cause notice is held being barred by limitation. The demand is also liable to be set aside.

FAQs

Case Details

Case Title: M/s. XOR Technologies LLP v/s Principal Commissioner of Customs (Preventive), New Delhi 

Citation: Customs Appeal No. 55572 of 2023 [DB]

Counsel for the Petitioner: Naveen Mullick and Shri ParthMullick

Counsel for the Respondent: Rakesh Kumar, Authorized Representative

Decision Date: 30.09.2024

Read Order