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M/s AMI Sanag Micromation (P) Ltd. Versus Commissioner C&C. E., Hyderabad-II (Vice-Versa)

Valuation - bifurcation between the value of the goods into (i) CPU and (ii) HDD and there by discharging payment of central excise duty only on the former without taking into account value of the latter. - The main defence raised by assessee against the allegations is that separate invoices were issued for the bought out items which were not manufactured by them, but were only supplied by them to customers. They did not avail Modvat credit on bought out items. - Held that:- Most of the jud .....

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computer unit, there is no iota of evidence to establish how the items from their trading premises was transferred to manufacturing premises. So also, there is no satisfactory explanation for insisting upon the customers to place split orders on two premises. - Demand of duty confirmed - however penalty reduced. - Decided partly in favor of assessee. - E/46/2007 & 461/2007 - Final Order No. A/30541-30542/2016 - Dated:- 21-6-2016 - Ms. Sulekha Beevi, C.S., Member (Judicial) and Mr. Madhu Moh .....

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the goods into (i) CPU and (ii) HDD and there by discharging payment of central excise duty only on the former without taking into account value of the latter. It appeared that assessee intentionally suppressed the fact with intent to evade payment of duty on computer peripherals by clearing them on trading invoices instead of on central excise invoices. 3. A show cause notice dated 24-11-1995 was issued to the appellant inter-alia proposing differential duty payable on the computer peripherals .....

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uded in the assessable value or not. After denovo adjudication in the denovo order dated 31-03-2014, the Commissioner directed the jurisdictional Asst. Commissioner to carefully re-examine the case records, identify the peripherals etc., and to re-determine the value of computer system. Meanwhile a show cause notice dated 05-01-2000 was issued to Managing Director of the appellant, on adjudication of this notice vide Order-in-Original dated 31-03-2004 a penalty of ₹ 1,00,000/ was imposed o .....

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However after computation of duty payable, done on basis of CESTATs order, reduced duty liability of ₹ 21.67 lakhs was confirmed. Being aggrieved by the confirmation of duty demand, interest and penalty by said order dated 29-09-2006 the assesee represented by learned counsel Shri. V.J. Sankaram is in appeal before us on the following main grounds: a) However, the learned Commissioner without providing documents, invoices other relevant papers on which duty is proposed to recomputed passe .....

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d by Cestat vide Final Order dated 14-02-2005. d) Out of the 18 items which were in dispute, the learned Commissioner during De-novo adjudication allowed exclusion from the assessable value in respect of 10 items and in regard to rest of the items, the dispute is in regard to interpretation of valuation provisions and as per the settled decisions the value of hard disk drive is to be excluded from the assessable value of computer system the learned Commissioner ought to have dropped the proceedi .....

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tion of first proceedings. 4. The Revenue represented by Shri. R.R. Bangar, AR reiterated the grounds of appeal stated in the appeal No.461/2007 filed by Revenue against the very same order(order dated 29-09-2006). The grievance of the department is that the order in denovo limiting to the issue of 1) re-computation of duty liability and 2) redetermination of penalty and time bar leaving the proposal of confiscation without any finding is not legal and proper. 5. We have heard both sides and gon .....

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which are purported to be bought out items, and meant for trading activity, are brought to the registered premises and used in the manufacture of functional computer. By taking recourse of this method the assessee was paying duty only on a part of the computer instead of the full system which comprises its integral part also. The correspondences of the assessee with its customers revealed that the purchase orders are placed on the assessee on the basis of their offered quotations. While offerin .....

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dicated. 7. One transaction has been explained in the show cause notice, which is as follows: The appellant supplied computer system to M/s BHEL. In response to the enquiry placed by M/s BHEL, the assessee vide their letter dated 19-12-1992 the following quotation was raised for supply. 1. 80386-33 CPU running at 33 Mhz 3167 weitek co- processor 64 kb Cache memory(15ns.5RAM) - ₹ 73,000/- 1.1 80387-33 CPU Mhz co-processor 4 MG Memory IDE 40MB HD.D. with intelligent disc control card - ͅ .....

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sent rate of 17.25%. Consequently, M/s BHEL placed purchase order dated 05-01-1993 for the items at a combined cost of ₹ 1,63,350/- at address 401, Paigah Plaza only. The Territory Manager of assessee factory vide letter dated 07-01-1993 replied to M/s BHEL stating that they have not received purchase order as per their quotation. The assessee requested to amend the purchase order and accordingly M/s BHEL placed two purchase order. One for an amount of ₹ 73,000/- at the address 401, .....

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ard, 200 MB I-HDD, 4MB Memory, 1.44 MB Floppy Disk Drive, 16 bit Eternet Card were fitted in the CPU mother board, and brought in assembled condition from their factory. The assessee was thus clearing computer peripherals without including their value in the assessable value of the computer system and not discharging Central Excise duty on such items. It is also the case of department that there were no separate accounts for the trading items and no documents were maintained for transfer of item .....

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ds that HDD, floppy drive, controller cards, random Access Memory etc. are peripherals and are not essential part of computer system. These were not included in the assessable value as being peripherals they were supplied according to customer's requirements. 10. The crux of the dispute is whether the value of the computer peripherals fitted with the main system and supplied together could qualify for exclusion from the assessable value. For better appreciation of the issue under considerati .....

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the computer. Since it forms part of computer, its value is also includable. (c)Monitor: It is a video display unit on which the input or output commands are displayed. Since without monitor, it is not possible to observe the commands and data, it forms essential component of the computer and its value is includible in the assessable value. i) Hard disk drive: It is a data-storing device permanently fixed in the computer and forms essential component of the computer. Its value is also includibl .....

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that drives discussed above are non-essential in the sense that computer can function without them, they are more considered as primary sources of input and output and are regarded as extensions of the system than as peripheral. i) Controller cards: CGA/VGA cards: these cards are require to connect a Monitor to the Computer and hence its value is includable in the assessable value. Telex cards: This an add-on card mounted on the Motherboard to connect a telex. Since this is an optional requireme .....

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dard equipment, its value is not to be included. iv) CO-PROCESSOR: It is distinct from the main processor in that it performs additional functions or assists the main processor. The most common type of co-processor is numeric or math co-processor. By its nature and use, its value is not liable to be included. v) MS DOS: This is an operating system software and is optional. Its value is also not liable to be included. vi) RANDAM ACCESS MEMORY: This is a semi conductor based memory that can be rea .....

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into digital form and storing in the computer. Its value is also cannot be included. x) UPS/STABILISER: This is an external device meant for providing uninterrupted and stable power to the computer and does not form part of the computer system. It is optional in nature. Its value also cannot be included. [emphasis supplied] 11. When the appellant had appealed against this order, the Tribunal ide order dated 14-02-2005 observed has under: "4. After hearing the rival submissions, we are incli .....

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should have considered the question of penalty and also the time ban In as much as she has ignored these points we have no other option, but to remand the case to the original authority(Commissioner) for re-computing the duty liability and redetermination of penalty, after examining the question of time bar. Thus, these appeals are disposed of in the above terms. 12. It is seen that based on this remand order of Tribunal the denovo adjudicating authority has passed order covering the areas as ma .....

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sioner's Order (Order-in-Denovo No. 12/2004-C.Ex. Dated 31-03-2004). (b) The issue of personal penalties. 11. Both these issues are required to be determined after determining the issue of limitation. On the issue of limitation, it was submitted that the department had all the relevant information when the classification list and price lists were filed before the excise authorities. This argument is incomprehensible to me. The show cause notice clearly states that the classification lists fi .....

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price lists only purchase orders which were other than items cleared form their service centre. It is also observed that the noticee had obtained split orders from their customers and cleared these goods under trading invoices from their service centre. In the light of these facts, 'it is difficult to entertain the claim of the Noticee that they had declared all relevant facts in the classification lists and price lists. 12. It was also submitted in the written submission during the persona .....

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has settled the issue in the case of M/s Nizam Sugar Factory Vs Collector of Central Excise, Hyderabad-1999(114) EL T 429. this case, the Hon'ble CESTAT has stated that there is no warrant to refer to the acquisition of the knowledge to the department when understanding the relevant date defined under Section 11A(iii) of the Central Excise Act, 1944. In coming to this conclusion, the Hon'ble CESTAT has referred to a number of case laws. 14. Even otherwise, the argument is based on the a .....

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he investigations actually concluded. 15. On the second issue, viz. penalty of Shri G G Choudhary, I find that no arguments have been raised in the written submissions or during the course of personal hearing. Therefore, I hold that Shri G. G. Choudhary being in-charge of day to day affairs is liable for penalty in terms of Rule 209A of the Central Excise Rules. 16. regards to the computation of the duty payable, it is done on the basis of the Hon'ble CESTAT's order which has accepted th .....

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ation/duty liability on add-on cards and mother boards. In the said case, the assessee had filed declaration before adjudicating authority to classify add on cards under sub-heading No.8473(10%) At that time the duty payable under classification 8471 was 5%. There was subsequent change in rate of duty under 8471 and 8473 when the assessee sought re-classification. Thus in the said case, the assessee was paying duty and the dispute was with regard to classification. In the case on hand, the appel .....

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nclude a monitor and printer. As a monitor and printer are not essential part of the computer their value cannot be included in the value of computer. We however, clarify that situation may be different where a manufacture sells a computer with a monitor and printer as a unit" (emphasis supplied) In the case on hand, the appellant sells computer systems/as a unit and therefore, as clarified, the ratio laid in the above judgment is of no assistance to the appellant c) The Tribunal in the cas .....

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distinguishable on facts. d) Another judgment relied by appellant is CCE, Pondichery Vs ACER India Ltd 2004(172) ELT 289(SC) and PSI data Systems Ltd. 1997 (89) ELT.3(SC). The question considered in these cases was whether the value of software installed in the computer before clearance is includable in the assessable value. The issue in the present case being entirely different the judgment is not applicable. Moreover, in the denovo proceedings, the adjudicating authority has held that the val .....

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Chennai) has remanded the matter directing the adjudicating authority to denovo adjudicate in the light of decision in O.R. G. Systems case( supra) 14. Most of the judgments placed before us by the appellant are regarding the issue whether the software is includable in the assessable value. The issue in the case being entirely different we do not consider it necessary to discuss them. At the cost of repetition, it has to be stated that the appellant was clearing computer system/a whole unit as i .....

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ssue of time bar has correctly analysed the facts and come to conclusion that acquisition of knowledge by the department was when the investigations actually concluded. On the second issue viz; penalty on the Managing Director of the assessee the authority has held that the said person being in charge of day to day affairs is liable for penalty in terms of Rule 209 of Central Excise Rules. The adjudicating authority has imposed penalty of ₹ 1,00,000/ on Managing Director and ₹ 2 Lakh .....

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- on the basis of the Tribunal's earlier order dated 14-02-2005. Assessee has raised a contention that no computation statement was provided to them, however we do not find any merit in this contention. The learned counsel for assessee relied upon the proposition laid in Kemtech International (P) vs CCE (I&G) 2013(292) ELT 321(SC) to canvas the argument that the appellant was not provided with the basis of the computation of duty demand and this amounts to violation of principles of natu .....

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t was then given liberty to file application for waiver of pre-deposit after re-quantification of duty and the Miscellaneous Application was adjourned to 24-11-2004 by which re-quantification was directed to be completed, after supply of copy to assessee. The application was then taken up on 24-11-2004, the department then submitted that assessee has not furnished relevant documents for re-quantification. This was refuted by the appellant by contending that the impugned order having been passed .....

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