Olectra Greentech Eligible For DFIA Scheme Benefits On Imported Lithium Ion Battery For Agriculture Tractor Export: CESTAT

The Hyderabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the assessee, Olectra Greentech, is eligible for Duty-Free Import Authorization (DFIA) Scheme benefits on imported lithium-ion batteries for agriculture tractor export.

The bench of Somesh Arora (Judicial Member) and A.K. Jyotishi (Technical Member) has observed that the lithium-ion battery imported by Olectra Greentech is covered by the description of the import item “Automotive Battery,” and the assessee is entitled to duty exemption under Notification No. 25/2023-CUS dated April 1, 2023.

The DFIA License enables duty-free import of inputs used in manufacturing export products, making allowances for waste, energy, fuel, catalysts, etc. To replace the Duty-Free Replenishment (DFRC) Scheme, the DFIA Scheme was introduced on May 1, 2006.

The department has raised the issue of whether the lithium-ion battery imported by the respondent is covered by the description of the import item “automotive battery” so as to allow them to use the transferable DFIA licence purchased by the respondent, which was issued under SION C-969 against the export of “agriculture tractor,” and consequently entitled to duty exemption under Notification No. 25/2023-CUS dated April 1, 2023.

The respondent assessee contended that including lithium-ion batteries for electrical vehicles, which are in their favour and which have permitted clearances under the DFIA scheme as per the clarifications issued by the DGFT, based on expert opinion from IIT, etc.

The assessee relied on the final order in the case of K S Enterprises vs. CCE. In which it was found out through various case law, including that of the High Courts as well as the Coordinate Benches of the Tribunal, that to get cleared under the DFIA Scheme only, broad categorization is required based on the test of “capability of being used." Beyond the evidence shown by expert opinion that can be used as other imported items, the same is entitled to exemption since the exemption notification itself is an export notification and is therefore liable to be interpreted liberally.

The department denied the benefit of the DFIA Scheme to the appellants on the ground that custom Notification No. 19/2015 Customs dated April 1, 2015, dealing with the scheme does not permit the benefit of lithium-ion batteries against the description of automotive batteries for use in tractors as a material permitted to be imported under the Foreign Trade Policy shall be of specific names, descriptions, or quantities, respectively, as a material used in the export of the resultant product.

The tribunal held that the DFIA scheme requires broad categorization as the same and then as "capable of being used in electrical vehicles.”.

The tribunal dismissed the appeal of the department and upheld the adjudicating authority's decision, confirming that the assessee is eligible for duty exemption.

Counsel For Appellant: Sandeep Kumar Payal

Counsel For Respondent: J.C. Patel

Case Title: Principal Commissioner of Customs Hyderabad Versus M/s Olectra Greentech Ltd.

Case No.: Customs Appeal No. 30081 of 2024

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