Battery Packs Imported To Manufacture Phones Fall Under 12% GST Category: CESTAT Allows Samsung's Appeal

The Customs, Excise & Service Tax Appellate Tribunal at Delhi has held that lithium-ion batteries used for the manufacture of mobile phones up to March 31, 2020 would attract 12% GST.A Bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) added that if lithium-ion batteries were not used in the manufacture of mobile phones, they would attract 28% GST up to July 26, 2018 and 18% GST thereafter until March 31, 2020.The issue before the Tribunal was with respect to the GST rate applicable to Lithium-ion batteries imported on/ before March 31, 2020, for use in the manufacture of mobile phones.Samsung argued that since there was no dispute in the classification of the said Lithium-ion batteries under tariff item 8507 60 00, they were squarely covered within the entry Sl. No. 203 of Schedule II of the IGST Rate Notification, which prescribes a 12% rate.However, a show cause notice came to be issued to Samsung, alleging that the imported lithium-ion batteries will be leviable to 28% GST (under Serial No. 139 of Schedule IV) up to 26.07.2018 and thereafter 18% GST (under Serial No. 376AA of Schedule III).Samsung argued that the IGST Rate Notification prescribes 12% GST for the manufacture of telephones for cellular networks or for other wireless networks, and a Lithium-ion battery is a 'part' of mobile phones, based on technical functionality and general parlance.The Department relied on General Rules of Interpretation (GRI) of the Customs Tariff to contend that specific entries at Serial No. 139 of Schedule IV covering 'Electronic accumulators' and Serial No. 376AA of Schedule III covering 'Lithium-ion Batteries' will prevail over Serial No. 203 of Schedule II, that covers 'parts for manufacture of telephones for cellular networks'.Samsung then submitted that the entries of the Customs Tariff and IGST Rate Notification are not aligned, and therefore, assistance could not be taken from the GRI for interpreting the relevant entry of the IGST Rate Notification.After hearing the parties, the Tribunal proceeded to examine the relevant entries, ie.e.— Serial No. 203 [Parts for manufacture of Telephones for cellular networks or for other wireless networks] of Schedule II; Serial No. 139 [Electric accumulators and other Lithium-ion accumulators including Lithium-ion power banks] of Schedule IV; and Serial No. 376AA [Lithium-ion Batteries] of Schedule III.It noted that battery packs are charged to 28% GST if they are imported as spares, but if they are imported for the manufacture of mobile phones, they are charged to 12% GST.It also noted the Fitment Committee's recommendation to increase the GST rate on mobile phones and their parts from 12% to 18% in order to remove the inversion in rates. “This also acknowledges that the GST rate for parts of mobile phones was 12% and it was raised to 18%,” the Tribunal remarked.It agreed with Samsung that when the Customs Tariff and IGST Rate Notification are not completely aligned, GRI cannot be urged to be applied for interpreting the IGST Rate Notification. It observed,“Customs Tariff provides for 8 digit classification for various products, which is ex-facie different from the Schedules to the IGST Rate Notification… goods falling under Chapter 85 in the IGST Rate Notification itself have been classified in different Schedules with the different descriptions when compared with Customs Tariff during the relevant period.”Such being the position, the Tribunal held that rules for interpretation of the First Schedule to the Customs Tariff can only be generally followed to the extent possible, and it cannot be urged that such provisions have been incorporated by pen and ink and have to be followed under all circumstances. Since the Lithium-ion batteries imported by the Assessees satisfied the description of Sl. No. 203 of Schedule II of the IGST Rate Notification, they were el to IGST at 12%. Accordingly, the practice followed by Samsung was found to be accepted and valid.Appearance: Mr. B. Lakshmi Narasimhan (Advocate) along with Ms. Nupur Maheshwari, Mr. Anurag Kapur, Mr. Rohan Muralidharan, Mr. Siddhant Indrajit (Advocates) and Mr. Ashwin Sundaram (Chartered Accountant) represented the Assessees; Shri S.K. Rahman, Authorized Representative for the Department.Case title: Samsung India Electronics Pvt. Ltd. & Ors. v. Principal Commissioner of CustomsCase no.: CUSTOMS APPEAL NO. 50727 OF 2021Click here to read judgment

Battery Packs Imported To Manufacture Phones Fall Under 12% GST Category: CESTAT Allows Samsung's Appeal

Kapil Dhyani

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