2025-VIL-155-DEL-CU
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CUSTOMS High Court Cases

Customs - Duty Drawbacks, Unlocking/Activation of Mobile Phones, "Taken into Use" - Petitioners are merchant exporters of mobile phones who purchase locked mobile phones from OEMs and then unlock/activate them to enable their use in destination countries - Department rejected the petitioners' claims for duty drawbacks on the exported unlocked/activated mobile phones on the ground that the process of unlocking/activation constitutes "taken into use" under the proviso to Rule 3(1) of the Duty Drawback Rules, thereby disentitling the petitioners from claiming drawbacks - Whether the act of unlocking/activating mobile phones after they are manufactured would disentitle the petitioners from claiming duty drawback on export of the said mobile phones under Section 75 of the Customs Act, 1962 read with the Duty Drawback Rules - HELD - The process of unlocking/activation of mobile phones merely makes the phones "ready for use" in the destination countries and does not constitute "taken into use" under the proviso to Rule 3(1) of the Duty Drawback Rules. The phrase "taken into use" has to be interpreted based on the nature and use of the product in question, and cannot have a universal meaning - In the present case, the unlocking/activation of mobile phones enables the phones to be used in the intended destination countries without hindrance and does not involve any depreciation in the value or usage of the phones beyond the basic configuration. The OEMs themselves have no objection to the unlocking/activation process and such process is a common and prevalent practice - The unlocking/activation is merely a configuration of the product to make it usable in the destination country, and does not amount to the phones being "taken into use" in a manner that would disentitle the petitioners from claiming duty drawbacks under Section 75 of the Customs Act - the impugned show cause notices and orders-in-original as well as the clarifications issued by the CBIC, which had taken the contrary view, are quashed - Department is directed to process the duty drawback claims of the petitioners in accordance with law – The writ petitions are allowed
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