Relief for Samsung: CESTAT Rules Imported ‘Assembly Front’ Falls Under ‘Display Assembly’ for Customs Duty Exemption [Read Order]

The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Samsung India Electronics Pvt. Ltd. is entitled to customs duty exemption on its imported ‘Assembly Front’, holding that the product qualifies as a ‘Display Assembly’ under Serial No. 6(a)(iv) of Notification No. 57/2017-Customs.

Samsung India, the appellant, is engaged in the manufacture and sale of mobile phones and imports ‘Assembly Fronts’ used in high-end models such as the Galaxy Note 10. These assemblies consist primarily of AMOLED display screens, along with other components like metal frames, vibration motors, sub-PCBA, and non-detachable batteries. The company claimed exemption from basic customs duty on these imports under the aforementioned notification, which exempts “Display Assembly” used in mobile phone manufacturing.

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The customs department provisionally assessed the imports and subsequently denied the exemption. A show cause notice was issued, and by order dated 20.02.2020, the Deputy Commissioner of Customs finalized the assessments, disallowed the exemption, and demanded differential duty and interest. The denial was based primarily on a technical report by the Ministry of Electronics and Information Technology (MEITY), which opined that the imported item was not a ‘Display Assembly’ but a more composite unit containing multiple sub-assemblies.

The Commissioner (Appeals) upheld the Deputy Commissioner’s order through two separate decisions dated 23.12.2021 and 31.10.2022, holding that the legislative intent of the exemption was to promote phased domestic manufacturing under the Phased Manufacturing Programme (PMP), and that the presence of additional components like a battery excluded the product from being classified as a ‘Display Assembly’.

Before the CESTAT, the company’s counsel argued that the term “Display Assembly” was not defined in the Notification and should be interpreted based on its principal function. They argued that the main function of the imported item was display-related and that the additional components did not change its essential character. They also argued that the MEITY opinion was not binding and had not been shared with the appellant during the adjudication process, thereby violating principles of natural justice.

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The revenue counsel argued that the exemption must be strictly interpreted and supported the MEITY view that the imported product, due to the inclusion of additional parts like a battery, did not meet the definition of a ‘Display Assembly’. They argued that Samsung’s interpretation would defeat the purpose of the PMP, which aimed to localize component manufacturing.

The two-member bench comprising Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) ruled in favor of Samsung. The tribunal held that the Notification does not require that the assembly consist “only” of display-related components and that no such limitation can be read into the text. The tribunal explained that exemption notifications must be interpreted by their language, not external intent or executive policies like the PMP.

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The tribunal held that MEITY’s technical opinion could not restrict the scope of a statutory exemption and observed that there was no evidence presented by the department to support the claim that the common trade parlance excluded such assemblies from the definition of “Display Assembly.”

The tribunal ruled that the presence of additional components does not disqualify a product from exemption if its primary function aligns with the exempted category. The tribunal set aside both impugned orders of the Commissioner (Appeals) and allowed all 26 appeals filed by Samsung with consequential relief.

To Read the full text of the Order CLICK HERE

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