CAAR Clarifies, Whether Duty-Free Import of Used Automation Equipment for Refurbishment Is Permissible?
Sangeetha Prathap
The Customs Authority for Advance Rulings (CAAR), Mumbai has clarified a significant issue for the automation and robotics industry concerning the duty-free import of used automation equipment for refurbishment and subsequent re-export. The Authority held that the exemption under Notification No. 134/94-Cus is available for second-hand machinery and automation systems imported for refurbishment, re-engineering, re-processing, testing, calibration, integration and allied operations, provided that the goods retain their identity and are mandatorily re-exported within the prescribed three-year period after such operations. The ruling followed an application filed by Wipro Pari Robotics Private Limited seeking advance clarity on the permissibility of importing used automation systems—including robots, conveyors, servo presses, control panels, gantry systems and other industrial assemblies—for project-specific refurbishment and value addition before re-exporting them to overseas customers.
The applicant explained that it receives automation equipment either from original equipment manufacturers or from foreign end-users and undertakes project-specific mechanical and software enhancements without altering the essential character of the imported machine. CAAR noted that the refurbishment activities undertaken—such as installation of grippers or end-of-arm tooling on industrial robots, integration of customised control software, modification of conveyor line length, addition of sensors and security labels on control panels, and testing of fully integrated modules—constitute activities falling within the ambit of “repair, reconditioning and re-engineering” as contemplated in Notification No. 134/94-Cus. The Authority recorded that in each case, the imported good remains identifiable by serial number and hardware configuration throughout the refurbishment cycle and that the applicant does not engage in any change of identity amounting to manufacture.
A central question raised in the proceedings was whether the duty exemption available under Notification No. 134/94-Cus could be combined with the benefits of the bonded-manufacturing regime under the MOOWR Scheme. CAAR made an unambiguous distinction between the two frameworks. It held that Notification No. 134/94-Cus provides complete exemption from customs duty for goods imported specifically for repair and mandatory re-export, whereas the MOOWR Scheme is a duty-deferment mechanism designed for manufacturing or other operations without any obligation to re-export. Since the legal foundations, objectives and operational conditions of both schemes are mutually incompatible, the Authority concluded that the two benefits cannot be availed simultaneously. The importer must elect either to claim exemption under Notification No. 134/94-Cus or to carry out activities under MOOWR, but not both at the same time.
Another notable aspect of the ruling concerns the treatment of waste and scrap generated during refurbishment. CAAR emphasised that the management of electronic waste, battery waste, plastic waste and other scrap is strictly governed by the E-Waste Management Rules 2016, the Battery Waste Management Rules 2022, the Plastic Waste Management Rules 2016, the Solid Waste Management Rules 2016 and related environmental regulations. Disposal must be routed through authorised recyclers with traceable documentation. From a customs perspective, the Authority reiterated the applicability of Section 65(2) of the Customs Act, under which duty is remitted on waste where refurbished equipment is exported and the waste is destroyed or cleared upon payment of duty. Where refurbished goods are cleared domestically instead of being exported, duty becomes payable on the proportion of imported content contained in the waste. CAAR further stated that customs authorities may require technical certification, including Chartered Engineer reports, for determining the value of waste and the proportion of imported material contained therein.
Concluding the ruling, CAAR held that the import of used automation equipment for refurbishment and re-export is permissible and eligible for full duty exemption under Notification No. 134/94-Cus, subject to strict fulfilment of statutory conditions including retention of identity, non-conversion of the goods into a new manufactured article, and completion of re-export within three years. The Authority, however, reaffirmed that the benefit of the notification is not compatible with the MOOWR framework and therefore cannot be simultaneously claimed. The ruling provides significant clarity to refurbishing-based automation businesses by confirming that duty-free imports are allowed when refurbishment is non-transformative and environmentally compliant, and when the refurbished goods are mandatorily re-exported.
Applicant’s Name: Wipro Pari Robotics Pvt. Ltd.
