CESTAT Delhi Grants Exemption to Samsung India on Display Assemblies

The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, ruled in favor of Samsung India Electronics Pvt. Ltd., setting aside customs duty demands raised by the department. The case revolved around whether the imported Mechanical Electrical Assembly (MEA) Front used in high-end smartphones like Galaxy Note 10 qualifies for basic customs duty exemption under Serial No. 6(a)(iv) of Notification No. 57/2017-Cus, which covers “Display Assembly” for mobile phones.

The Tribunal held that Samsung’s imported Assembly Front meets the criteria of “Display Assembly” and therefore qualifies for the exemption, rejecting the department’s interpretation that the inclusion of components like battery or receiver disqualified it from the benefit.

Background of the Case

Appellant: Samsung India Electronics Pvt. Ltd.
Issue: Rejection of exemption claimed on MEA Front assemblies used in smartphone manufacturing
Exemption Notification: Serial No. 6(a)(iv) of Notification No. 57/2017-Cus (as amended)
Goods in Question: MEA Front containing display, sub-PCBA, non-detachable battery, and waterproofing elements
Department’s View: Product does not qualify as “Display Assembly” since it contains additional sub-parts
Total Appeals: 26 (including Customs Appeal No. 51162/2022 and 25 related matters)

Department’s Contentions

Based on a MEITY technical committee report (2019) and PMP guidelines, the department claimed the imported MEA Fronts were composite parts—not pure display assemblies.
The exemption was denied on the ground that the assembly included non-detachable battery and sub-PCBA, which are not covered under the exemption clause.
The Ministry of Electronics and IT (MEITY) opined that MEA Fronts cannot be categorized solely as display assemblies as per the Phased Manufacturing Programme (PMP) roadmap.

Samsung’s Key Arguments

The term “Display Assembly” is not defined in the notification; hence, it must be understood in its natural, technical, and trade parlance.
The main component (OLED display) accounts for over 65–70% of the assembly’s value, and the core function of the MEA Front is to enable display and touch.
Additional components such as waterproofing elements, vibration motor, and sub-PCBA do not alter the fundamental character of the display function.
Denial of exemption by importing interpretations from MEITY’s PMP violates legal principles of statutory interpretation.
Circulars and MEITY reports cannot override or narrow down a statutory notification, especially when the word “only” does not appear in the exemption clause.

CESTAT’s Observations and Legal Rationale

Display Assembly Includes MEA Front:
- Assembly Front meets the functional and physical characteristics of a display assembly.
- Add-on features such as non-detachable battery do not change the primary function of the product.
No Restrictive Language in Notification:
- The Tribunal emphasized that the word “only” is absent in the exemption clause. Thus, the mere presence of additional sub-components does not disqualify the product.
MEITY’s Role Not Binding:
- Interpretation of customs law and exemption notifications lies with Customs and judicial authorities, not with MEITY.
- MEITY’s opinions, though informative, cannot restrict the plain meaning of a fiscal notification.
Reliance on Precedents:
- CESTAT cited Supreme Court rulings including:
  - Union of India vs. Intercontinental (India) – circulars cannot override exemption notifications.
  - Philips India Ltd. – additional features do not bar exemption if the product still performs the principal function.
  - Tata Iron and Steel Co. Ltd. – exemption cannot be denied merely because goods contain non-exempt parts when “only” or “exclusively” is not stated.
Circulars Cannot Add Conditions:
- CBIC circulars issued later cannot introduce new restrictions absent in the notification.
Burden of Proof Not Met by Department:
- No technical evidence or market trade understanding was provided to establish that MEA Fronts are not display assemblies.

Final Verdict

All 26 appeals by Samsung India allowed.
Commissioner (Appeals) orders dated 23.12.2021 and 31.10.2022 set aside.
Tribunal held that MEA Front qualifies as a “Display Assembly” under Serial No. 6(a)(iv).
Exemption from basic customs duty restored, with all consequential relief.

Legal Significance

This ruling is a watershed moment for electronics and mobile manufacturers, clarifying that:

Technical advancements and additional components do not negate exemption benefits if the product meets the primary description.
Intent of exemption must be derived from the notification text, not external policy guidelines.
Judicial clarity overrides departmental interpretations, reinforcing a pro-trade and pro-manufacturing approach under Indian customs law.

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Source: CESTAT Delhi

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