Disabling 'Regional Lock' Of Phone To Allow Use Outside India Doesn't Make It 'Used Goods' Ineligible For Duty Drawbacks: Delhi High Court

The Delhi High Court has held that merely unlocking/ activating a new mobile phone by disabling the “regional lock” which is put by original equipment manufacturers to restrict usage to a specific geographical location, does not make the mobile phone a “used” good. In the case at hand, Petitioners' claim of duty drawbacks on export of unlocked/ activated mobile phones was rejected on the ground that the process of unlocking the mobile phone would require it to be “taken into use”, thus triggering the above provision. The Petitioners then submitted that there is also a new process of “air-activation” whereby mobile phones are unlocked/activated through a computer system, without even unboxing or unsealing of the mobile phones. With the growth of mobile phone manufacturing/ assembling in India more and more exports would take place and the mere fact that the said products are configured for use in foreign countries cannot deprive the Petitioners from duty drawbacks under the prevalent law discussed hereinabove.” Court added that unlocking/activation of the mobile phone merely makes the mobile phone more usable in the destination country. Thus, the said decisions are in sharp contrast to the facts of the present case wherein the unlocking/activation of a mobile phone makes the product more accessible and more useful considering the purpose for which it has been manufactured i.e., facilitation of communication and optimum utilization of all the features of a mobile phone.” In its 49-page judgment, the Court also observed that the purpose of drawback provisions is to encourage not mere complete manufacturing but even steps such as processing, assembling, refining, or any other value addition to the product.