Spare Parts of Capital Goods Not Covered by Notification No. 24/2005-Cus: CAAR Ruling in AT&S India Private Limited

Background of the Advance Ruling Application

AT&S India Private Limited, a manufacturer of bare Printed Circuit Boards (PCBs), approached the Customs Authority for Advance Rulings, Mumbai (CAAR) under Section 28H(1) of the Customs Act, 1962. The application, filed in Form CAAR-1 and received on 02.04.2026, sought clarity on whether spare parts of capital goods used in PCB manufacturing are eligible for exemption from Basic Customs Duty (BCD) under Sl. No. 39 of Notification No. 24/2005-Cus dated 01.03.2005.

The assessee manufactures PCBs classifiable under Customs Tariff Item 8534 00 00 and imports capital goods required for PCB production under the Export Promotion Capital Goods (EPCG) Scheme, availing duty benefits thereunder. However, spare parts required for routine maintenance of those capital goods are presently imported on payment of applicable customs duties.

The central question before CAAR was:

Whether spare parts of capital goods used in the manufacture of PCBs are eligible for BCD exemption under Sl. No. 39 of Notification No. 24/2005-Cus when imported in compliance with the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.

Business Operations and Nature of Imports

PCB Manufacturing Process

The assessee operates a PCB manufacturing facility involving multiple sequential operations, broadly including:

  • Inner layer photo printing and automated optical inspection
  • Pressing and drilling
  • Copper plating
  • Outer layer photo printing and optical inspection
  • Solder mask and screen printing
  • Surface finishing (including HASL/ENIG and other finishes)
  • Routing, testing (BBT, blind hole checks, warpage checks)
  • Final inspection, Acceptable Quality Level testing, and packing

This integrated manufacturing chain relies heavily on sophisticated capital machinery, each of which requires specific spare parts for uninterrupted functioning.

Nature of Spare Parts Imported

The assessee imports more than 5,000 varieties of spare parts for the upkeep and maintenance of capital goods deployed in PCB production. Illustratively (with changed examples for explanation):

  • Ionizer – used as a spare in oxide-coating equipment, which performs oxide coating on PCB inner layers.
  • Gas pressure regulator – a spare for precision drilling machines that drill holes on PCBs.
  • Three-fold suction unit – a spare component in exposing machines, used during photo-printing processes.
  • Roller with timing pulley – a spare used in inner and outer layer automated optical inspection machines, necessary for movement and inspection accuracy.

Due to the sheer number of spare parts, their import frequency, and the complexity of EPCG procedural compliance for each such item, the assessee chose to import these spares on payment of duty rather than under EPCG.

Relevant Entries in Notification No. 24/2005-Cus

Notification No. 24/2005-Cus grants full exemption from BCD to specified goods, subject to conditions. The following entries were particularly relied upon:

  • Sl. No. 22

    • Heading: 8534 00 00
    • Description: All goods
    • Effect: All goods classifiable as “Printed Circuits” (including PCBs) are fully exempt from BCD when imported.

  • Sl. No. 39

    • Heading: Any Chapter except Chapter 74
    • Description:

      All goods except solar tempered glass or solar tempered (anti-reflective coated) glass for the manufacture of goods covered by S. Nos. 1 to 38 above, provided that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.

On this basis, the assessee argued that all goods imported for the manufacture of PCBs (which are covered at Sl. No. 22) qualify for BCD exemption under Sl. No. 39, subject to compliance with IGCR procedures.

Broad Interpretation of “All Goods for the Manufacture of Goods”

The assessee submitted that:

  1. Sl. No. 22 covers PCBs under CTI 8534 00 00.
  2. Sl. No. 39 extends exemption to “all goods” (other than the specified glass) imported for the manufacture of goods falling under Sl. Nos. 1–38, including PCBs.
  3. Therefore, any item required for manufacturing PCBs—whether or not physically incorporated into the PCB—should fall within the ambit of Sl. No. 39, provided IGCR procedures are followed.

It was further argued that, in several other customs notifications, where the Government intended to confine exemption strictly to “inputs”, “parts”, “components”, or “raw materials”, the language explicitly reflected such limitation. Here, however, the phrase used is “all goods” without qualification, indicating a wider scope.

Judicial Precedents on “for the manufacture of goods”

The assessee invoked several decisions to support a broad interpretation of the phrase “for the manufacture of goods”:

  1. Oblum Electrical Industries Pvt. Ltd. v. Collr. Of Cus., Bombay, 1997 (94) ELT 449 (SC)

    • Involved “Crystar beams” used as kiln furniture for manufacturing porcelain insulators, imported under Notification No. 116/88-Cus.
    • The Supreme Court examined expressions like “materials required to be imported for the purpose of manufacture of products … or replenishment of materials used in the manufacture of resultant products, or both”.
    • It was held that the phrase did not cover only materials physically used in the end product but also materials indispensable to the manufacturing process, though not present in the final product.

  2. **Commissioner of Customs, Kolkata v. Rupa and Co.