By TIOL News Service

BANGALORE, APR 03, 2019: THE matter is listed before Tribunal on being remanded by the High Court of Karnataka vide its Order dated 29.8.2018. The appellants are manufacturers of mobile handsets and similar phones. They imported batteries to be used for manufacture of mobile handsets and similar phones for availing concessional rate of duty under Notfn 21/2005 superseded by Notfn 23/2010. As required by Notification, they executed Bond for an amount of Rs.20,00,000/- still in force for the purpose of import of batteries which shall be liable to be invoked / enforced as per the terms of the said Bond in case the assessee fails to pay the demanded duties of Customs, by the jurisdictional Central Excise officer.

On the strength of this Bond, they were allowed clearances of the said batteries under concessional rate against Bills of Entry filed by them at ICD, Bangalore. While filing the Bill of Entry, appellants have shown the address of the premises which was not the same as the premises in respect of which the Bond was executed. However, the goods cleared were received in the premises in respect of which Bond was executed.

A SCN was issued to the appellants alleging that the said batteries are not parts / accessories of the mobile handsets or other phone manufactured and cleared by them in terms of the said Notification and hence, the benefit of Notification was not available to them. Further, the SCN alleged that these goods were not received in the premises where they were registered for use in terms of the Bond executed by them.

Earlier, Tribunal vide its Order in 2014-TIOL-1838-CESTAT-BANG allowed the appeal of the appellants and set aside the demand of Customs duty. Consequently, the interest and penalties were also set aside.

Against this order, Revenue filed an appeal before the High Court and High Court has remanded this matter back to the Tribunal.

The entire case of the Revenue is that the batteries imported by appellants were not used in the process of manufacture of the finished goods viz., mobile phones or other phones, hence cannot be treated as the parts and accessories of the said mobile phones or other phones. However, this Tribunal has consistently held in its decisions that when mobile/other phones cannot work without batteries, they are to be considered as parts of the mobile phones.

CC (Imports) Chennai vs. Vuppalamrita Magnetic Components Ltd. - 2016-TIOL-2381-CESTAT-MAD

United Telecom Ltd. vs. CC, Bangalore - 2009-TIOL-933-CESTAT-BANG

CCE, Bangalore vs. NI Micro Technologies Pvt. LTd. - 2012-TIOL-1035-CESTAT-BANG

Following the ratio of said decisions, the Tribunal observed that -

++ The imported batteries are essentially parts and accessories of the mobile phones and the benefit of exemption under Notification 21/2005 is admissible to them.

++ It is also observed that benefit of exemption has been allowed by assessing officer on the basis of certificate certifying that the said batteries were part, component of mobile phones. Once having held that these batteries were part, component of mobile phones and used in manufacture of said mobile phones, Revenue could not change its stand without any justifiable reason in subsequent proceedings.

On the second issue, it is found that the Notfn 21/2005 itself is admissible on the basis of certificate given by the jurisdictional officer and in terms of Bond executed before him. When the certificate was issued for a particular premises and a Bill of entry filed indicating some wrong address of the same person, the error in mentioning address cannot be anything but a clerical error. Because the certificate indicating the correct address was part of the assessment documents. The error in address subsequently been rectified also. In his order, the Asst. Commissioner has only stated that records for accountal and assessments were not produced before him. If such records were required, Asst. Commissioner could have called for a report on verification of receipt and usage of the said goods and thereafter, adjudicated the matter. Having not done so, the order of the Asst. Commissioner holding against the appellants cannot be sustained. Adjudicating authority should afford an opportunity to the appellants to produce the documents with records to receipt and accountal of the said goods in the premises where the Bond have been executed and thereafter, take a final view with regards to the admissibility of benefit of exemption Notification. In case, he is satisfied with the documentation produced, the entire demand should be dropped. Accordingly, matter for this limited purpose needs to be sent back to him for consideration.

Accordingly, appeal filed by appellant is allowed by remanding the matter back to the adjudicating authority for consideration of the documents with regards to receipt and usage of the goods at the premises for which the Bond was executed.

(See 2019-TIOL-944-CESTAT-BANG)