The Central Board of Indirect Taxes and Customs (CBIC) has issued mandating strict compliance with judicial rulings concerning duty drawback claims on the export of unlocked mobile handsets.
The instruction, dated March 19, 2026, follows a series of judicial pronouncements, including a key order by the Delhi High Court in February 2025. The High Court’s ruling was subsequently upheld by the Supreme Court of India in July 2025.
A review petition challenging the apex court’s decision was also dismissed, thereby giving finality to the legal position.
What Delhi HC held?
The Delhi High Court in the case of Aims Retail Services Private Limited Versus Union Of India W.P.(C) 9461/2023 allowed duty drawback claim on exports of unlocked/activated mobile phones.
The bench of Justice Prathiba M. Singh and Justice Dharmesh Sharma has observed that the unlocking/activating of the mobile phones as per the procedures adopted by the Petitioners herein is mere ‘Configuration’ of the product to make it usable and does not constitute “taken into use” under proviso to Rule 3 of the Duty Drawback Rules.
The bench stated that clarifications go beyond Section 75 of the Customs Act, 1962 and the Duty Drawback Rules since the interpretation sought to be given by CBIC is that unlocking/activation of mobile phones constitutes “taken into use”. The interpretation which is contained in the Clarifications is not sustainable.
The court held that the prevalence of multiple networks, multiple service providers across the world has also to be viewed in the context of standardisation of mobile phone technologies where a phone manufactured in one country can be used in another country seamlessly.
The court, while considering the thousands of uses that a mobile phone can be put to, mere unlocking cannot constitute use by the Petitioners. The development of standards in the field of telecommunication which enables usage of mobile phones across countries may be rendered ineffective if such configuration is held to the detriment of the OEM or the traders/exporters.
The court noted that with the growth of mobile phone manufacturing/ assembling in India more and more exports would take place and the mere fact that the products are configured for use in foreign countries cannot deprive the Petitioners from duty drawbacks under the prevalent law discussed hereinabove. Drawbacks are benefits which are given to exporters and in the case of any ambiguity such benefits should go in favour of the exporters and not the other way round.
“The unlocking/activation of the mobile phone merely makes the mobile phone more usable in the destination country and the same would therefore not constitute “taken into use” under proviso to Rule 3 of Duty Drawback Rules,” the court said.
The Court clarified that it has not examined each of the cases as to whether duty drawbacks are liable to be granted or not to the Petitioner therein. The individual cases shall be processed by the Customs Department for drawbacks in accordance with law.
Notification Details
Instruction No. 02/2026-Customs
Date: 19/03/2026
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