Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 16.10.2026
CESTAT Delhi Upholds Concessional Customs Duty Benefit for Electric-Bus Components Used Through Job Work
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed PMI Electro Mobility Solution Private Limitedβs appeal, holding that use of concessional-duty imported components in electric buses manufactured through a job-work arrangement met the substantive end-use requirement.
Background: Duty concession for electric-bus components
PMI Electro Mobility Solution Private Limited imports components used to manufacture electric buses, including lithium-ion battery packs, AC/DC motors and controllers, converters, regenerative brake systems, and electric compressors. The company claimed concessional or nil customs duty under entries 528 and 528A of Notification No. 50/2017-Cus, subject to compliance with the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (IGCR Rules).
The concession was linked to a clear end-use condition: the imported components had to be used to manufacture electrically operated vehicles. PMI submitted import intimations to Customs, furnished a continuity bond with security, and filed the required returns.
The dispute arose from an order to supply 20 electric buses to Himachal Road Transport Corporation (HRTC). PMI entered into a memorandum of understanding with its parent company, PMI Coaches Pvt. Ltd., for fabrication of the buses. The work was carried out at Plot No. 26, Industrial Area, Dharuhera, a premises shared by the two companies and used by PMI for the bus-manufacturing activity.
Why Customs raised the demand
Customs treated the arrangement as a sale of imported components rather than job work. The department relied on GST invoices issued between PMI Electro Mobility and PMI Coaches, as well as statements recorded during the investigation. It alleged that PMI had cleared the imported goods βas suchβ to a separate legal entity without obtaining Customs permission or paying the duty forgone.
On that basis, the Principal Commissioner denied the exemption and confirmed a differential-duty demand of Rs. 1,06,69,156. Interest was ordered under Section 28AA of the Customs Act, Rs. 25 lakh already deposited was appropriated, and a penalty was imposed under Section 114A. The department also invoked the extended limitation period under Section 28(4), alleging suppression of facts.
PMIβs core defence
PMI argued that the imported components were never diverted from their intended purpose. Instead, they were used to produce the 20 electric buses ultimately supplied to HRTC. Its position was that the arrangement with PMI Coaches was contract manufacturing or job work under its supervision and control, not a sale that defeated the customs exemption.
The company also argued that:
- The imported goods were not unutilised or defective goods, so the clearance provisions in Rule 7 of the IGCR Rules did not apply.
- No physical removal took place from the premises where the components were received and used.
- The exemption notification required use in the manufacture of electric vehicles, but did not require PMI itself to physically perform every manufacturing operation.
- GST documentation did not change the essential nature of the arrangement from job work to a sale.
- It had made the required customs intimations, executed the bond, and filed returns, making the extended limitation period inappropriate.
Tribunalβs findings: end use prevailed over the procedural dispute
CESTAT focused on whether the imported goods had been used for the purpose contemplated by the exemption notification. It found that they had: the components were used to manufacture electric buses, and the finished buses were supplied to HRTC.
The Tribunal noted several material facts in PMIβs favour:
- PMI had filed the required import intimations and submitted a bond with surety or security.
- Required returns had been filed regularly.
- PMI and PMI Coaches shared the manufacturing premises.
- The imported components remained at Plot No. 26, where the buses were fabricated.
- There was no allegation that the imported goods were used for any purpose other than manufacturing electric buses.
The Tribunal described the concern over the arrangement with PMI Coaches as a procedural lapse rather than a substantive breach. While the goods were shown in invoices as supplied to the job worker, the arrangement did not alter the fact that the imports were used for the exempt end use.
Job work does not, by itself, defeat the exemption
A central part of the ruling is the Tribunalβs conclusion that an importer may use a job workerβs manufacturing capability without necessarily losing the benefit of an end-use exemption. The decision relied on prior Tribunal rulings that recognized job-work manufacturing as compatible with concessional-duty import schemes where the prescribed end use is achieved.
The Tribunal also noted that the later IGCR Rules, 2021 expressly recognized the practice of sending imported goods to job workers. This supported the view that job work is a legitimate business arrangement and that the 2017 regime should not be read to impose an unstated requirement that every manufacturing step be performed directly by the importer.
Outcome and significance
CESTAT set aside the Principal Commissionerβs order and allowed PMI Electro Mobilityβs appeal. As a result, the differential-duty demand of Rs. 1.0669 crore, associated interest, appropriation, and penalty cannot stand under the impugned order.
The ruling reinforces an important principle for importers using concessional-duty schemes: where imported goods are demonstrably used for the specified end product, procedural issues surrounding job-work documentation should not automatically result in denial of the exemption.
The substance of end-use compliance remains decisive, particularly when the goods stay within the relevant manufacturing premises and are ultimately incorporated into the intended finished product.
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Source: CESTAT Delhi
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