Parts of Power Banks Were Eligible for Exemption under Notification Number 50/2017-Cus (S. No. 512)

CUSTOMS, EXCISE & SERVICE TAX

 APPELLATE TRIBUNAL NEW DELHI

~~~~~

PRINCIPAL BENCH – COURT NO.3

Customs Appeal No. 51063 Of 2020

 

[Arising out of Order-in-Original No. 22/2020/U.G./Pr. Comm dated 01.06.2020 passed by Principal Commissioner of Customs, (Import) Air Cargo Complex, New Delhi-110037]

TDK INDIA PVT LTD

Vs

PRINCIPAL COMMISSIONER of CUSTOMS, (IMPORT), AIR CARGO

COMPLEX NEW DELHI

APPEARANCE:

Shri B. L. Narasimhan, Ms. Jyoti Pal and Ms. Anjali Singh, Advocates for the Appellant

Shri Nagendra Yadav, Authorised Representative for the Respondent

CORAM :

HON’BLE MS. BINU TAMTA, MEMBER (JUDICIAL)

HON’BLE MR. P. V. SUBBA RAO, MEMBER (TECHNICAL) FINAL ORDER NO. 50108 /2025

 

 

 

 

V.SUBBA RAO:

Date of Hearing: 06.01.2025 Date of Decision: 28/01/2025

 

1. M/s TDK India Pvt Ltd. filed this appeal to assail Order-in- Original dated 01.06.2020 passed by the Principal Commissioner of Customs whereby he decided the proposals made in the show cause notice dated 07.06.2019 covering the period April-2018 to March 2019.
2. By the impugned order, the Principal Commissioner confirmed a demand of Rs. 1,22,64,992 under section 28(1) of the Customs Act 1962and imposed penalty of Rs. 12,26,499 under Section 112 (a) of the Act.
3. The appellant manufactures lithium-ion batteries for mobile handsets and power banks used for charging other lithium-ion batteries or portable electronic devices. For this purpose, the appellant imported parts and components used in the manufacture of power banks and claimed the benefit of exemption notification number 50/2017-Cus dated 30.06.2017 which provides exemption to “Parts, components and accessories except populated, printed circuit boards for use and manufacture of lithium-ion batteries other then batteries of mobile handsets including cellular phones falling under tariff item 85076000”.
4. According to the appellant, it is entitled to the benefit of this exemption notification whereas according to the Revenue this exemption will not apply to parts of power banks and will apply only to parts and components of lithium-ion batteries.
5. We have heard Shri Narasimhan, learned counsel for the appellant and Shri Nagendra Yadav, Learned Authorised Representative for the Revenue and perused the records.
6. We find that an identical question was before this bench in Customs Appeal No. 55572 of 2023, M/s XO or Technologies LLP vs. Principal Commissioner and in Customs Appeal  50221 of 2021- M/s Ambrane India Pvt Ltd Vs Commissioner of Customs (Preventive)- New Delhi.  In both appeals, it was decided that parts of power banks were eligible for exemption under notification number 50/2017-Cus (S. No. 512). The relevant extracts of final order in appeal no. 55572 of 2023 or reproduced below.

“2. 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 as mentioned above 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.

3. XXXX XXXXXXXXXXX
4. Having heard the rival contentions, perusing the entire records of the present appeal, we observe that the moot question to be adjudicated in the present case is as follows:

Whether the appellant is eligible for duty exemption benefit given under Entry No. 512 of Notification No. 50/2017 dated 30.06.2017 while importing parts/components for the manufacture of Lithium Ion Battery or the benefit of said notification has rightly been denied to the appellant as the appellant has actually manufactured power bank as different from Lithium Ion Battery from the imported parts and components.

20. XXXX XXXX XXXXX
21. Thus, it stands clear that the benefit of exemption to components, parts and accessories to be imported at concessional rate of duty since is based on observance and compliance of IGCR Rules, 2017, therefore, the term manufacture appearing in Notification No. 50/2017 dated 30.06.2017 in its entry at S.No. 512 has to be interpreted by taking into consideration the provision of Rule 3 (e) of IGCR Rules, 2017, as quoted above.

Further we observe that the parts and components imported by the appellant, admitedly, are:

(1) Lithium Ion Cells

• Cables
• Nickle/stainless steel strips
• Heat resistant tapes, silicone, hardware, stickers, form tapes, glues, screws, Insulation tapes etc.
• Shell/housing/protective casing

27. The appellants have been submitting to the Concerned officers as ‘Information” the block diagram of Lithium-Ion Battery Pack. Admittedly no objection earlier was ever raised about the process of manufacture shown in those diagrams nor about the claim that Lithium Ion Battery is being manufactured by the  Thus, it stands admitted procedure that imported Lithium Ion Cells are connected with other such cells by use of imported nickel strips/stainless strips (imported parts) by means of electrical welding both manually as well as mechanically. Imported cables are then been connected the imported heat resistance tapes and Insulation stickers are used on the imported Lithium Cells to be wrapped around terminal of those cells as a protection measure to avoid any shot circuit/over- heating. The form stickers are also used around the combination of those imported cells to act as a shock observers only and to keep the cells tightly packed in the imported protective case. At this stage it is lithium Ion Battery which comes into existence.
28. As per the above quoted definition of Manufacture of IGCR Rules, 2017, to avail the benefit of exemption under the notification no. 50/2017, the imported parts and components being the raw material or inputs have to be processed in any manner that results in emergence of a new product having a distinct name, character and  The above procedure is sufficient for us to hold that the imported parts and components have been used by the appellant in such manner that Lithium Ion Battery emerges as a new product having a distinct name and use. The manufacture has to be read in terms of Rule 3 (e) of IGCR Rules, 2017 as already quoted above.
29. The term cell and battery are used inter changeably, however both are quite different. Cell isa single unit device which convert chemical energy into electrical energy whereas battery is a group of such cells. Depending upon the type of electro lights used in the cell. The cell is either wet or dry. Whereas battery is either a primary battery or a secondary battery i.e. a chargeable or nonchargeable battery. Cell is a single unit and battery is a combination of those single units. This physical/scientific explanation about the meaning of cell and battery is sufficient for us to hold that the appellant has imported cells as single units with various other components and combined the single unit cells with the help of the other imported components to be converted into a battery. The above discussion is sufficient for us to hold that the term manufacture of Rule 3(e) IGCR, 2017 gets satisfied at the time of emergence of battery as distinct from its component i.e. Individual lithium cell and others. From the case law as quoted above about interpretation of a notification, it is clear that definition of ‘Manufacture’ as given in IGCR Rules, 2017, the scope thereof cannot be enlarged from the stage of emergence of new product to the stage of manufacture of final product which is Power Bank in the present case.
30. Coming back to Entry No. 512, we observe that the exemption is available when the imported parts and components are used in manufacture of lithium batteries. The notification is nowhere requiring the Lithium Ion Battery to be manufactured as the final product of the importer. This observation and definition of manufacture under IGCR Rules, 2017 a joint reading, is sufficient for us to hold that the entry  512, the term manufacture therein, has not be to understood/interpreted in terms of the definition of manufacture given under Excise Act, 1944. Otherwise also the period in question is subsequent to coming into effect of Goods and Service Tax Act, 2017 repealing most of the provisions of Excise Act, 1944. Above all the language of notification has to be strictly interpreted as has also been impressed upon by the department. In the case Dilip Kumar & Co. (supra) the Hon’ble Supreme of Court though has held that ambiguity in exemption notification the benefit thereof cannot be claimed by the assessee and has to be interpreted in favour of Revenue. However, it has simultaneously held that when words in a statute are clear, plain and unambiguous sand only one meaning can be inferred the courts are bound to give effect to the said meaning irrespective of the consequences in applying rule of plain meaning any hardship and Inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. Especially in fiscal statutes and penal statutes, it has also been held that regard must be had to the clear meaning of words and matter should be governed wholly by the language of notification, equity or Intendment having no place in interpretation of tax statute. It is only in case of two possible interpretation of the exemption statute that the benefit of interpretation is given to the assessee in case it is an ambiguous taxing statute, however, benefit has to be given to the Revenue in case there is ambiguity in the exemption clause of the statute. The word ‘plain meaning’ has also been elaborated by the Hon’ble Apex Court as follows:
31. The well-settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be Inferred, the Courts are bound to give effect to the said meaning irrespective of consequences. If the words in the statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the Legislature. In Kanal Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907, it was held that if the words used are capable of one construction only then it would not be open to the Courts to adopt any other hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act.
32. in applying rule of plain meaning any hardship and Inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain language results in absurdity, the Court is entitled to determine the meaning of the word in the context in which it is used keeping in view the Commissioner, Gadag Sub- legislative purpose (Assistant Division, Gadag v. Mathapathi Basavannewwa, 1995 (6) SCC 355). Not only that, if the plain construction leads to anomaly and absurdity, the Court having regard to the hardship and consequences that flow from such a provision can even explain the true intention of the legislation. Having observed general principles applicable to statutory interpretation, it is now time to consider rules of interpretation with respect to taxation.
33. in construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocent might become victims of discretionary decision-making. Insofar as taxation statutes are concerned, Article 265 of the Constitution (265. Taxes not to be imposed save by authority of law – No tax shall be levied or collected except by authority of law.) prohibits the State from extracting tax from the citizens without authority of law, It is axiomatic that taxation statute has to be interpreted strictly because State cannot at their whims and fancies burden the citizens without authority of law. In other words, when competent Legislature. mandates taxing certain persons/certain objects In certain circumstances, expanded/interpreted to include those, which were not intended by the
34. At the outset, we must clarify the position of ‘plain meaning rule or clear and unambiguous rule’ with respect of tax law. The plain meaning rule suggests that when the language in the statute is plain and unambiguous, the Court has to read and understand the plain language as such, and there is no scope for any Interpretation. This salutary maxim flows from the phrase “cum inverbis nullaam bigultas est, non debet admittivoluntatis quaestio”. Following such maxim, the Courts sometimes have made strict interpretation subordinate to the plain meaning rule (Mangalore Chemicals case (Infra para 37).), though strict interpretation is used in the precise  To say that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is self-contradictory. Similarly the word strict interpretation has also been described:
35. Strict interpretation. (16c) 1. An interpretation according to the narrowest, most literal meaning of the words without regard for context and other permissible meanings. 2. An interpretation according to what the interpreter narrowly believes to have been the specific intentions or understandings of the text’s authors or ratifiers, and no more. Also termed (in senses 1 & 2) strict construction, literal interpretation; literal construction; restricted interpretation; interpretatiostricta; interpretatio restricta; interp retatio verbalis. 3. The philosophy underlying strict interpretation of statutes. Also termed as close interpretation; interpretation restrictive.
36. See strict constructionism under constructionism. Cg. Large interpretation; liberal interpretation (2).
37. As already observed above the exemption entry has simply talked about manufacture out of imported parts and components that to in compliance of IGCR Rules, 2017 which defined term manufacture also and the entry is silent for such manufacture to be of the final product of the importer of parts and components. We hold that there is no ambiguity in the notification. Department has wrongly interpreted the manufacture to mean as manufacture of end product. It is held that since the appellant has used the imported parts and components in manufacture of Lithium Ion Battery which irrespective the battery has been captively used to manufacture power bank and  irrespective  that  power  bank  has  a  slight different connotation from Lithium Ion Battery despite having the same function as that of Lithium Ion Battery, we hold appellant entitle for the benefit of exemption of Entry No. 512 of Notification 50/2017 dated 30.06.2017.

32. Department’s yet another submission is that the Central Government simultaneously issued another Notification No.02/2019-Cus dated 29.01.2019 (sr.  17B) for the Lithium- ion cells w.e.f. 30.01.2019, the relevant portion of which reads as under:

 

S. No.	Chapter or Heading or Sub- Heading or Tarriff item	Description of goods	Rate	Conditio n No.
17 A	8507 60 00	Lithiumion cell for use in the manufacture of battery pack of cellular mobile phone.	5%	1
17 B	8507 60 00	Lithium ion cell for use in the manufacture of power bank of lithium ion	5%	1

 

33. From the perusal of the above, it is evident that w.e.f. 29.01.2019, lithium-ion cells were taken out of the scope of Serial No. 512 of Notification No. 50/2017-Cus and placed in a separate entry 17B of Notification No. 02/2019 where those were made chargeable to duty at the rate of 5%. Conversely, Lithiym-ion cells were squarely covered within the ambit of Sr. No. 512 prior to 29.01.2019 and were eligible for exemption. Hence, the amendment made vide Notification Nos. 02/2019-Cus and 03/2019- Cus both dated 29.01.2019 clearly manifest that before the amendment, subject goods were exempted vide Notification No. 50/2017-Cus. Post the above amendment, the subject goods have been withdrawn from exemption notification and have been placed under the duty rate of 5%.
34. After the discussion above, it is important to also check as to how HSN code considered the products in question at the relevant time i.e. during the year 2017 to 2019.It can judicially be noticedthat the period in question from 2017 to 2019 was the period of speediest technological innovations with respect to gadgets in dispute. Admittedly the relevant entry in HSN code is 8507 which reads as follows 85.07 Electric accumulators, including separators therefore, whether or not rectangular (including square). 8507.10-Lead-acid, of a kind used for starting piston engines.

• 8507.20-Other lead-acid accumulators
• 8507.30-Nickel-cadmium
• 8507.40-Nickel-iron
• 8507.50-Nickel-metal hydride 8507.60-Lithium-ion
• 8507.80-Other accumulators 8507.90-Parts

35. The notes to this chapter clarifies that electric accumulators are nothing but the storage batteries or secondary batteries which are characterized by the fact that the electro chemical action is reversible so that the accumulator may be recharged which are used just like battery to store the electricity and to supply it when required. A direct current is passed through the accumulator producing certain chemical changes (charging): when the terminals of the accumulator are subsequently connected to an external circuit these chemical changes reverse and produce a direct current in the external circuit (discharging). This cycle of operations, charging and discharging, can be repeated for the life of the accumulator, Accumulators consist essentially of a container holding the electrolyte in which are immensed two electrodes fitted with terminals for connection to an external circuit. In many cases the container may be subdivided, each subdivision (cell) being an accumulator in itself; these cells are usually connected together in series to produce a higher voltage. A number of cells so connected is called a battery.
36. The chapter note further clarifies accumulators contained one or more cells and the circuitry to interconnect the cells amongst themselves, often referred to as “battery packs”. Apparently and admittedly there was nothing in HSN code nor even under Tariff Act during the period in question, which can specifically be known as power banks. It was in the Notification No. 02/2019 dated 29.01.2019 that the word “power bank of Lithium Ion” was for thefirst time found mentioned.
37. XXXXXX XXX
38. From the entire above discussion itis clear that the power bank performs the same function of storing and transfering electrical energy, it being a Lithium Ion Battery that is a combination of Lithium Ion Cells, however, connected to a printed circuit board which is meant for converting the 3.7 volt stored energy to 5 volt energy as is required by the gadget to be charged through the said power bank working on Lithium Ion Battery. It also stands established that it is only the printed circuit board (PCBA) which distinguishes a generic Lithium Ion Battery from power bank. Appellant is admittedly paying Customs Duty on the import of said PCBA
39. XXXXXX XXXX XXXXX
40. Department’s another submission is that in the year 2017 itself, a Notification No. 01/2017 dated 26.06.2017-IT vide entries 376 AA and entries 376AAA had distinguished lithium-Ion Batteries (376AA) from Lithium-Ion Accumulators including Powerbank (376AAA),  based  upon  which  the department alleged that the power bank was known as a different product than lithium battery since the Year 2017 itself. But we find that entry 376AA came into existence only on 20.08.2018 and it talks only about Lithium Ion Batteries. The entry no, 376AAA though introduced the word Power Bank but we observe that this entry came into existence on 29.01.2020 ie. after the period in dispute. In the light of entire above discussion we hold 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.”
41. We find no reason to take a different view in this  In view of the above, we allow the appeal and set aside the impugned order with consequential relief to the appellant.

(Pronounced in the Court on 28.01.2025)

 

 

 

(BINU TAMTA)

MEMBER (JUDICIAL)

 

KHUSHNUMA

(P. V. SUBBA RAO)

MEMBER (TECHNICAL)