Oppo Eligible For Customs Duty Exemption On Microphones & Receivers Used In PCBA Prior To 06.07.2019: CESTAT

Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) opined that by virtue of the amendment Notification dated 06.07.2019, customs duty would also be leviable on microphones and receivers when imported into India, even if they are imported for the manufacture of PCBA of cellular mobile phones.

In this case, the assessee/appellant, M/s. Oppo Mobiles India Pvt. Ltd. is engaged in the business of manufacturing cellular mobile phones and smartphones.

The assessee claimed exemption from duty of customs under Serial No. 6 of the Exemption Notification dated 30.06.2017 at (a)(i) and (b).

PCBA is mentioned at Serial No. 6(a)(i) and (b) provides that parts imported for use in the manufacture of PCBA would also be exempted.

A show cause notice was issued to the assessee, demanding customs duty of Rs. 2,50,54,790/- for the period from 02.02.2018 to 06.07.2019 on the microphones and receivers imported by the assessee.

The show cause notice was issued on the ground that the assessee was availing the benefit of exemption under Serial No. 6A of the amendment Notification dated 02.04.2018 that prescribed nil customs duty for inputs used in the manufacture of PCBA of cellular mobile phones but as microphones and receivers are not part of PCBA, the benefit of exemption was not available to the assessee.

The Principal Commissioner denied the benefit of exemption claimed by the assessee and ordered for recovery of the short-paid duty under section 28(1) of the Customs Act with interest under section 28AA of the Customs Act, and also imposed a penalty under section 112(b)(ii) of the Customs Act.

The counsel for the assessee argued that the assessee was entitled to avail the benefit of exemption from payment of duty under the Exemption Notification dated 30.06.2017, as amended from time to time, since microphones and receivers are parts used in the manufacture of PCBA, which is used in the manufacture of cellular mobile phones.

The revenue argued that in terms of the amendment Notifications dated 02.02.2018, 02.04.2018 and 06.07.2019, the assessee was not entitled to claim exemption of duty.

The revenue also placed reliance upon the “Phased Manufacturing Policy” of the Ministry of Electronics and Information Technology, as exemption to parts of mobile phones would put the domestic industry to considerable hardship.

The Tribunal noted that the amended Notification dated 06.07.2019, to the extent it amends Serial No. 6A, makes the position very clear. It is under this Notification that microphones and receivers have been excluded against Serial No. 6A. This means that before this amendment Notification, microphones and receivers were considered as parts used in the manufacture of PCBA of cellular mobile phones.

The impugned order, instead of accepting the case of the assessee that this is a clear pointer to the fact that prior to 06.07.2019, microphones and receivers were parts used in the manufacture of PCBA, has applied this Notification retrospectively with effect from 02.02.2018, noted the bench.

The Tribunal opined that the impugned order, passed by the Principal Commissioner, rejecting the claim of the assessee seeking exemption from payment of customs duty under the Exemption Notification dated 30.06.2017, cannot be sustained.

In view of the above, the Tribunal allowed the appeal.

Case Title: M/s. Oppo Mobiles India Pvt. Ltd. v. The Principal Commissioner of Customs (Import)

Case Number: CUSTOMS APPEAL NO. 51026 OF 2020

Counsel for Appellant/ Assessee: Shri H.K. Sharma, Consultant and D.K. Nayyar, Advocate

Counsel for Respondent/ Department: Shri Mihir Ranjan

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