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M/s. Supreme Cables, M/s. Acer India Pvt. Ltd. Versus CCE & ST, Pondicherry

2018 (1) TMI 529 - CESTAT CHENNAI

Deemed Manufacture - laptops - It appeared that as per Note 6 to Section XVI of the first schedule to the Central Excise Act, 1985 and also as per Section 2 (f) (iii) of the Central Excise Act, 1944, the processes carried out on the imported laptop computers amounted to manufacture - Held that: - It is not disputed that the imported laptops are subsequently sent to Supreme in their individual packings, ie., in unit containers. It is not the case that the purpose of sending these laptops to Supre .....

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lly functional and would not be accepted by ELCOT. The ingredients of Section 2 (f) (iii) of the Act will definitely get attracted in respect of processes undertaken, hence the impugned activity will definitely fall within the legal definition of manufacture under the said Section 2 (f) (iii) ibid. - Confiscation - Penalty - Held that: - the sum of the components of SAD and CVD exceed the duty liability demanded in this case - the ingredients of Section 11 AC will not be attracted in this ca .....

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ned order, they are taken up together for common disposal. 2. The facts of the case are that M/s. Acer India Pvt. Ltd., the appellants in appeal No. E/699/2010 (hereinafter referred to as Acer), are engaged in the manufacture of Personal Computers, Laptops and Computer Systems . It appeared to the department that Acer had imported laptops and that they are loading software on them at the premises of one M/s. Supreme Cables, appellant in appeal No. E/698/2010 (hereinafter referred to as Supreme) .....

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remises of Supreme. From the statements of various persons employed by Acer and Supreme it emerged that the imported laptop computers had been sent to Supreme, for dismantling of the Hard Disk Drive (HDD) copying of the software into the HDD, mounting the HDD again in the laptop computer and also for subsequent testing. It appeared that as per Note 6 to Section XVI of the first schedule to the Central Excise Act, 1985 and also as per Section 2 (f) (iii) of the Central Excise Act, 1944, the proce .....

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,801/- with interest from Supreme; imposed penalty equal to duty demanded under Section 11 AC of the Act on both Acer and Supreme; confiscated 1095 laptops seized from Acer and 651 laptops seized from Supreme, however, gave an option to redeem the goods on payment of redemption fines of ₹ 7,05,000/- and ₹ 4,20,000/- respectively. The adjudicating authority however extended the benefit of Cenvat Credit, of only the CVD paid, subject to fulfilment of conditions stipulated in Cenvat Cre .....

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pre-loaded with the necessary BIOS and Linux operating software. b) The laptops in question were only with the software supplied by the customer, viz., ELCOT, because the customer desired that the users in his organization had a specific requirement of graphics usage compatibility. This fact ipso facto does not mean that the laptops as imported were not in usable condition. c) The laptops in dispute are received at the Appellant s premises and unpacked. The availability of the accessories in th .....

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QC, the appellants do physical test so scratches or dent, if any and also the functional test on to the completeness of the computer. Finally, the appellants do the cleaning and packing of the laptop computers after entering the availability of all accessories including the spare CDs software for future contingencies and affix the label of Acer brand on the cartons. d) The goods as imported are treated as pre-packed commodity and levied to CV duty under Section 4A on MRP basis by Customs on the .....

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like unpacking, dismantling the hard disk from the laptops, mounting of the HDD back to the laptops, conducting Burn test, carrying out physical and functional test and screen printing the same ILCOT on the laptops are covered by the artificial definition of manufacture under Section 2 (f) (iii) of the Central Excise Act, 1944. Ld. Advocate submitted that the processes carried out on the imported laptops were only done in compliance of the supply order requirements of M/s. ELCOT, which is a Govt .....

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e impugned order. This also will indicate that the appellants had no reason to suppress or wilfully evade any payment of duty liability. In the circumstances, imposition of penalty on both the appellants under Section 11 AC is unjustified. 4. On the other hand, on behalf of the department, Ld. AR, Shri B. Balamurugan, AC, supported the adjudication. The submissions made by the Ld. AR can be summarized as under:- a) Acer were getting the work of repacking, relabeling and loading of software, test .....

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of the product is required by the buyer (ELCOT). c) The said processes are indispensible without which ELCOT will not accept the laptops in question. 5. Heard both sides and have gone through the facts of the case. 6.1 For better understanding, Section 2 (f) as it was in force during the disputed period is reproduced as under:- (f) manufacture includes any process, - (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the S .....

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all be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account 6.2 It is not disputed that the imported laptops are subsequently sent to Supreme in their individual packings, ie., in unit containers. It is not the case that the purpose of sending these laptops to Supreme is only for quality control checks, or for that matter, to ens .....

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y processes which involved repacking of goods in or into the unit container, and in addition relabeling, testing, and loading of software without which the laptops would not be fully functional and would not be accepted by ELCOT. The ingredients of Section 2 (f) (iii) of the Act will definitely get attracted in respect of processes undertaken, hence the impugned activity will definitely fall within the legal definition of manufacture under the said Section 2 (f) (iii) ibid. 6.3 We therefore do n .....

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