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2017 (2) TMI 665 - CESTAT BANGALORE

2017 (2) TMI 665 - CESTAT BANGALORE - TMI - Manufacture or second sale - The appellant-assessee was engaged in procuring various parts of computers such as CPU, monitor, hard-disk drive, mouse, etc., from different suppliers. These parts were being assembled by the assessee by interconnecting the various components resulting in the emergence of computer systems - whether the process amounts to manufacture and is liable to duty or is only a second sale transaction and is not liable to excise duty .....

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computers and peripherals would not amount to manufacture, since the network does not bring into existence goods with a distinct new name, character and use. - Appeal allowed - decided in favor of assessee. - E/876 - 877/2003-DB - Final Order No. 20197 - 20198 / 2017 - Dated:- 6-2-2017 - Shri S. S. Garg, Judicial Member And Shri V. Padmanabhan , Technical Member Mr. M. S. Nagaraja, Advocate T. Rajeswara Sastry & Associates For the appellant Mr. N. Jagadish, AR For the respondent ORDER P .....

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parts of computers such as CPU, monitor, hard-disk drive, mouse, etc., from different suppliers. These parts were being assembled by the assessee by interconnecting the various components resulting in the emergence of computer systems. The department was of the view that assembling the various components of the computer results in emergence of new product i.e. Computers, on which excise duty was liable to be paid. The assessee, on the other hand, argued that they were engaged in procuring vario .....

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appeal before CEGAT and the CEGAT vide the Final order dated 12.2.2002 remanded the matter to the adjudicating authority to consider the plea made by the assessee that the principles of natural justice were not complied with since copies of several documents relied upon in the show-cause notice were not supplied to them even after repeated request. The adjudicating authority passed order in the remand proceedings vide impugned order dated 30.6.2003. The assessee challenged the impugned order be .....

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Karnataka and the Hon ble High Court passed the following order. (a) (a) The Order dated 4th May 2005 passed by the CESTAT impugned in the present appeal is set aside and the Appeal Nos. E/876, 877/2003 and E/271/2004 are restored to file. (b) The CESTAT shall consider the appeals on merits in accordance with law as expeditiously as possible, preferably within a period of six months from the date of receipt of this order. (c) The CESTAT while considering the merits of the case shall examine the .....

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for the Revenue. 4. Learned advocate, in his arguments, emphasised the following points. i. The appellants have purchased various components of computers like CPU, monitor, keyboard, etc., and have been selling them to their customers. The department has not produced any evidence to the effect that they were engaged in undertaking manufactureof automatic data processing machine. The activity engaged by them is in the form of trading which constitutes second sale for the purposes of sales tax/VA .....

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supply the same. In the impugned order, the Commissioner has recorded that these documents are also not traceable with the Department. For failure to supply these documents, the demand should not be enforced upon them. iv. On account of non-supply of above documents, the learned advocate contended as follows: * The assessees contention is that they are engaged in the activity of trading. This can be demonstrated only by showing the details of purchase of various components and accessories, comp .....

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d to issue a show-cause notice invoking the larger period of limitation and demanding duty for the period from 28.11.1996 to 31.5.1998 (the period after the date of visit of the departmental officers). vi. They were under the bona fide belief that the activity undertaken by them were not amounting to manufacture and consequently, the department cannot allege wilful suppression and invoke the larger period of limitation. vii. He also relied upon several case laws to support all the above argument .....

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rs. These configurations of components have also been put together and assembled to make them working computer systems. He relied upon the decision of the Hon ble Supreme court in the case of UOI vs. Delhi Cloth and General Mills Co. Ltd.: 1997 (1) ELT (J199) (SC) and argued that the activity of assembling various duty-paid components of computers brings into existence a working computer system under Chapter 8471 as an automatic data processing machine. The activity of assembling the various com .....

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of non-submission of documents, he submitted that these documents which have been cited in the show-cause notice but not furnished by the department were originally submitted by the assessee himself. He further referred to the correspondences with the department had with the Deputy Commissioner of Commercial Taxes from which it emerges that purchase documents for the year 1996-97 and 1997-98 were already in possession of the assessee and have been used for filing the commercial tax returns. Acco .....

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limitation. He relied upon the decisions of M/s. Mehta & Co.: 2011-TIOL-17-SC-CS and Neminath Fabrics Pvt. Ltd.: 2010 (256) ELT 369 (Guj.). 6. The allegation made by the Revenue after investigation into the affairs of the assessee is that they have procured various component parts of computer such as CPU, mother board, monitors, hard disk, mouse etc. and assembled them into working computers and supplied the same to various customers. By taking the view that the activity of assembling variou .....

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rtment does not throw light as to how and where the assembly was done and who carried out the assembly. The assessee has also claimed that they have no factory premises for manufacture of such goods. 6.1 At the outset, we examine the question whether putting together various components of computers and assembling the same into a computer system, same amounts to manufacturer and whether excise duty is required to be paid. The description of Automatic Data Processing (ADP) machine under Chapter 84 .....

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For the purpose of heading No.84.71, the expression automatic data processing machinesmeans:- (i) Digital machines, capable of (1) storing the processing programme or programmes and at least the data immediately necessary for the execution of the program; (2) being freely programmed in accordance with the requirements of the user; (3) performing arithmetical computations specified by the user; and (4) executing, without human intervention, a processing programme which requires them to modify the .....

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it is to be regarded as being a part of a complete system if it meets all of the following conditions: (i) It is of a kind solely or principally used in an automatic data processing system; (ii) It is connectable to the central processing unit either directly or through one or more other units; and (iii) It is able to accept or deliver data in a form (codes or signals) which can be used by the system. (c) Separately presented units of an automatic data processing machine are to be classified in .....

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. By reference to the above chapter notes, we note that each of the component parts such as CPU, hard disc, monitor etc. would form a separate unit of an ADP machine referred to in Chapter Note 5(b). Each of these units will also be classified under 84.71 and when the various units are connected together to perform the function of ADP machine, it will function in the form of a system which should have all the features of the machines referred to in Note 5(a)(i). Thus, we have the example of a la .....

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in classified under 84.71. 6.3 With the above background, we examine the question whether any new product come into existence by assembly of various components to form the computer system. We note that all units of an ADP are designed to be interconnected to enable the ADP system to be formed to carry out its function. It cannot be said that the assembly of various units into a working system has brought about any new goods which have a distinct name, character or use different from that of the .....

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