Customs Duty Exemption on Imported Parts for Lithium-Ion Batteries allowed for Ambrane India as Assembly Qualifies as ‘Manufacture’: Supreme Court Upholds CESTAT Order [Read Order]

Ambrane India Pvt Ltd., appellant-assessee, manufactured Lithium-ion batteries and power banks and was registered under Notification No. 68/2017-Cus dated 30.06.2017 under Rule 5 of the Customs IGCR Rules, 2017.

The assessee imported parts, components, and accessories under Notification No. 50/2017-Cus, entry at Sl. No. 512, which exempted such goods (except populated PCBs) for use in manufacturing Lithium-ion batteries other than mobile handset batteries.

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The department contended that the assessee used the imported goods to manufacture power banks, not Lithium-ion batteries, and therefore, the exemption did not apply. A Show Cause Notice (No. 19/2019 dated 31.07.2019) was issued proposing recovery of Rs. 6,66,86,244 as differential duty along with interest under Section 28AA of the Customs Act, 1962, and imposing penalties under Sections 114A and 117.

The demand was confirmed through Order-in-Original No. 02/2020-21 dated 30.06.2020. The appellant challenged this order before the tribunal.

The two member bench comprising Dr.Rachna Gupta (Judicial Member) and P.V.Subba Rao (Technical Member) reviewed the appeal and noted that the main issue was whether the assessee was entitled to duty exemption under Entry No. 512 of Notification No. 50/2017-Cus for importing parts to manufacture Lithium-ion batteries, or whether the exemption was denied because the parts were later used to make power banks.

The appellate tribunal observed that the assessee manufactured products like mobile handsets and CCTV cameras and had imported items such as Lithium-ion cells, nickel strips, USB cables, and plastic casings. The exemption required that imported parts be used to manufacture Lithium-ion batteries as defined under IGCR Rules, 2017.

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The bench noted that the assessee had submitted battery diagrams to authorities and that the imported cells were assembled with strips, cables, and protective packaging. It concluded that Lithium-ion batteries were indeed manufactured from the imported parts.

It held that under IGCR Rules, “manufacture” meant creating a new product with a distinct name, character, and use. Combining imported cells and components into batteries qualified as manufacture, even if the batteries were later used to assemble power banks.

The appellate tribunal rejected the department’s claim that manufacture required producing the final product (power banks). It noted that before Notification No. 02/2019, Lithium-ion cells were exempt under Notification No. 50/2017, and the term “power bank” did not exist in HSN or tariff entries during 2017–2019. The appellant had sold its products as Lithium-ion battery packs.

The CESTAT explained that power banks are Lithium-ion batteries with a PCB to convert voltage, and using the manufactured batteries to make power banks did not affect the exemption. It also observed that the assessee had followed relevant TRU circulars and IGCR Rules, submitted required information, and complied with continuity bond requirements.

The tribunal concluded that the appellant had lawfully availed the exemption, extended penalties were not justified, and the show cause notice was barred by limitation. It set aside the impugned order and allowed the appeal.

The matter was heard on 19-09-2025 before the Supreme Court, comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan. The Court upheld the order dated 18.10.2024 of the CESTAT, dismissed the appeal, and disposed of any pending applications.

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