New Delhi, May 18, 2026: In a significant ruling concerning the classification of imported mobile phone components, the Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has allowed the appeal filed by Ismartu India Pvt. Ltd. and quashed the customs duty demand raised by the department.
The dispute arose after customs authorities alleged that Ismartu India had imported complete mobile phones in Completely Knocked Down (CKD) condition while declaring them merely as “parts of mobile phones.” The department contended that the imported consignments were effectively complete mobile handsets presented in an unassembled state and therefore liable to classification under Customs Tariff Heading (CTH) 8517 14 00/8517 12 19, attracting higher customs duty.
The company, however, maintained that the imported consignments did not constitute complete mobile phones and required several locally procured components, including batteries, camera modules, and software installation, along with substantial manufacturing and testing processes before becoming marketable products.
During investigation, the customs department relied heavily upon reports furnished by a Chartered Engineer. However, the engineer’s reports noted that the imported parts formed only an incomplete mobile phone and were not functional in the condition imported. The reports specifically highlighted the absence of critical components such as batteries and cameras and emphasized the necessity of software loading, testing, and quality control processes.
The Tribunal, comprising Justice Dilip Gupta, President, and Shri P. Anjani Kumar, Member (Technical), observed that Rule 2(a) of the General Rules for Interpretation (GIR) would apply only if incomplete goods possess the “essential character” of the finished product.
The Bench noted that the department failed to conclusively establish that the imported parts had the essential characteristics of complete mobile phones. It further held that the burden of proving reclassification rested upon the customs department and not upon the importer.
Referring to earlier Supreme Court decisions including D.L. Steels and Hewlett Packard India, the Tribunal reiterated that the onus to justify a change in classification lies squarely on the revenue authorities.
The Tribunal also observed that the Chartered Engineer’s reports actually supported the importer’s case by confirming that the imported goods were incomplete and non-functional without further manufacturing activity and testing.
Accordingly, CESTAT set aside the Order-in-Original dated June 19, 2024 passed by the Principal Commissioner of Customs and allowed the appeal filed by Ismartu India Pvt. Ltd.
The ruling is expected to have wider implications for the electronics manufacturing sector, particularly for companies importing mobile phone components under assembly-based manufacturing models in India.
