TMI Blog2007 (6) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 874/2006) are Directors of the said company and are aggrieved by imposition of penalties. They are also partners of a firm viz. Consolidated Computer Services [CCS for short]. The firm was constituted in the year 1993 and was engaged in trading and servicing of computers and peripherals thereof since then. M/s. CCS Infotech Ltd. [CCSIL for short] are a public limited company incorporated in the year 1997 with a Board of Directors including S/Shri Hasan Abdul Kader and Ratna Kumar. The company acquired the business of the firm under a Deed of Acquisition dated 2-4-2001, but this acquisition was nullified in an Arbitration Order dated 28-8-2003 which was not challenged by any of the parties. In the impugned order, learned Commissioner fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not 'manufacture' any computer during the period of dispute and were only engaged in trading activities; (d) the activity of upgrading a computer by enhancing memory or processing speed or enhancing the capacity of hard disc drive did not amount to 'manufacture' under Section 2(f) of the Central Excise Act, nor did the activity of affixing brand name to such computer amount to 'manufacture' under the said provision of law, and the Commissioner's finding that they were engaged in the assembly of computers out of bought out components is arbitrary and contrary to his own observations recorded in the impugned order; and (e) they had believed bona fide on the basis of the C.B.E. C's Circular No. 454/20/99-CX., dated 12-4-99 that upgradatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board's Circular relied on by learned Counsel, learned SDR has submitted that that circular is applicable only to old and used computer systems and not applicable to new computer systems like the ones manufactured and cleared by the appellants. In this connection, she has also contested the appellant's plea of bona fide belief. 4. We have given careful consideration to the submissions. Learned Commissioner framed two issues as follows (i) Whether the activities performed by CCS/CCSIL [as reflected in the Job Cards] would amount to 'manufacture' within the scope of Section 2(f) of the Central Excise Act, 1944; and if so, (ii) Whether the duty payable by CCS can be recovered from CCSIL in addition to its own liability under a common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' The Quality Check department would inspect the CPU with regard to the configurations and add the additional hardware like additional memory, floppy drive, hard disc drive, CD-Rom drive etc. The CPU would then be tested with the diagnostic software for its performance and will be certified as 'Quality Check Passed' in the job card. Subsequently, the Quality Check Department will allocate and affix serial numbers on all such CPUs. Their brand-name will also be affixed on the CPUs if required by the customers. The input and output devices like monitor, keyboard, mouse, modem etc., which were either originally received during the purchase of the base machine or held as inventory stock, would also be supplied along with the CPU to the customer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pherals purchased by CCS/CCSIL. Learned SDR, however, has not been able to establish that the computer systems mentioned in ANNEXURE - F were assembled from the peripherals mentioned in ANNEXURE - S-I. We have found no correlation between the entries in ANNEXURE - F with those in ANNEXURE - S-I. In the result, Revenue has failed to demolish the appellants' case that they were only engaged in the activity of upgrading boughtout computers to the specifications of their customers, which was essentially a trading activity. The respondent has not cited any Chapter Note in Chapter 84 of the First Schedule to the Central Excise Tariff Act or any Section Note in the relevant Section of the Tariff Schedule making such upgradation of computers deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all impressed with this decision of the adjudicating authority. When the Commissioner framed the second issue [whether the duty payable by M/s. CCS can be recovered from M/s. CCSIL], he referred to a 'common' show-cause notice, as if show-cause notice was issued to the firm also. As a matter of fact, no show-cause notice was issued to the firm. To fix duty liability on a person without issuing show-cause notice to him is against the basic tenet of the rule of natural justice. Assuming that M/s. CCS were held liable to pay duty on the computer systems cleared by them during the above period in adjudication of a show-cause notice duly issued to them, it would still be incumbent on the adjudicating authority to state valid reason as to why su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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