The CESTAT Delhi in the case of M/s Samsung India Electronics Pvt. Ltd. v. Principal Commissioner of Customs [Final Order Nos. 50896–50909/2025 dated June 23, 2025] held that lithium-ion batteries imported for manufacture of mobile phones are classifiable under Serial No. 203 of Schedule II of Notification No. 01/2017-IGST (Rate) dated June 28, 2017, and are liable to IGST at 12%, and not at 28%/ 18% as alleged by the Department.
Facts:
M/s Samsung India Electronics Pvt. Ltd. (“the Appellant”) is engaged in the manufacture of mobile phones in India and imports lithium-ion batteries specifically designed for use in these mobile phones. These batteries were classified under Customs Tariff Item 85076000 and cleared on payment of Basic Customs Duty at 15% and IGST at 12%, availing the benefit of Serial No. 203 of Schedule II of Notification No. 01/2017-IGST (Rate) dated June 28, 2017.
A Show Cause Notice dated June 27, 2020, was issued to the Appellant under Section 28(1) of the Customs Act, 1962, alleging misclassification and short payment of IGST. The Department contended that the correct classification of lithium-ion batteries was under Serial No. 139 of Schedule IV (IGST @ 28%) for the period up to July 26, 2018, and under Serial No. 376AA of Schedule III (IGST @ 18%) from July 27, 2018 onwards.
The Department further alleged that in terms of Note 2(a) of Section XVI of the Customs Tariff, parts classifiable in their own right must be classified in their specific heading, and therefore lithium-ion batteries, specifically covered under Heading 8507, must be excluded from classification under 8517 70 90 as “parts for telephones for cellular networks”. The Department relied on the General Rules for Interpretation (GRI) and the explanatory notes to exclude the benefit of concessional rate under Entry 203.
The Appellant contended that lithium-ion batteries are vital and integral components of mobile phones and thus qualify as “parts for manufacture of mobile phones”. The Appellant relied on prior clarification issued by the Commissioner of Customs (ACC-Import), New Delhi dated August 22, 2017, and also on the language of Entry 203, which specifies use for manufacture as the only requirement.
Issue:
Whether lithium-ion batteries imported and used in the manufacture of mobile phones are classifiable under Serial No. 203 of Schedule II of Notification No. 01/2017-IGST (Rate) attracting IGST @ 12%, or are subject to IGST @ 28% or 18% under Serial Nos. 139 or 376AA, respectively?
Held:
The CESTAT Delhi in Final Order Nos. 50896–50909/2025 held as under:
- Observed that, the manufacturers relied upon the clarification dated August 22, 2017 issued by the Commissioner of Customs (ACC-Import), which stated that lithium-ion batteries imported for manufacture of mobile phones would attract 12% IGST under Entry 203, while those imported as accessories would attract higher rates under other entries.
- Noted that, Agenda Item No. 5(iii) of the 31st GST Council Meeting dated December 22, 2018, stated: “When used for manufacture of mobile phones these [lithium-ion batteries] attract 12% GST rate.” This confirmed the legislative intent behind Entry 203.
- Held that, Entry 203 specifically covers “parts for manufacture of telephones for cellular networks or other wireless networks” and the only two conditions are that the goods should fall under Chapter 85, and that they should be used in the manufacture of telephones for cellular networks, and
- Held that, lithium-ion batteries used in mobile phone manufacture fulfil both criteria and squarely fall under Entry 203 of Schedule II.
- Noted that when statutory language is clear and unambiguous, reference to classification under the Customs Tariff is unnecessary. The language of Entry 203 is self-contained and distinct from entries 139 or 376AA which merely describe “electric accumulators” or “lithium-ion batteries” in general.
- Further rejected the Department’s reliance on GRI, Section Notes, and Chapter Notes of the Customs Tariff for classifying goods under the IGST Rate Notification. It emphasized that IGST Notification is a taxing notification and not a classification schedule under the Customs Tariff.
- Held that, lithium-ion batteries imported for manufacture of mobile phones would attract IGST @ 12% under Entry 203 from April 1, 2018 to March 31, 2020. Accordingly, the demand for differential IGST at 28%/ 18% under Entries 139 and 376AA was set aside.
Our Comments:
The Tribunal has rightly adopted a strict and literal interpretation of the IGST Rate Notification, recognizing that taxing entries must be construed based on the language employed therein without importing assumptions from the broader Customs Tariff regime unless expressly mandated. In this case, the Tribunal found no ambiguity in Entry 203—once it is established that the goods fall under Chapter 85 and are used in mobile phone manufacturing, the 12% IGST applies.
Moreover, the Tribunal reinforced the understanding that Notifications like Entry 203 are complete taxing codes in themselves. The Department’s insistence on applying Note 2(a) of Section XVI and GRI 3(a) to exclude lithium-ion batteries from the scope of Entry 203 was rightly rejected, relying instead on the Supreme Court’s observation in Pioneer Silk Mills Pvt. Ltd. v. Union of India [1995 (80) E.L.T. 507 (Del.)], where it was held that expressions such as “so far as may be” in such taxing texts are directory and not absolute incorporations of Customs Tariff structure.
The Tribunal also places reliance on BPL Display Devices Ltd. v. CCE, Ghaziabad [2004 (174) E.L.T. 5 (S.C.)] for the interpretive position that “for manufacture” includes goods “intended for manufacture”. This means that the intended end-use of lithium-ion batteries, even if not physically embedded at the time of import, brought the goods within the fold of Entry 203.
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