Customs, Excise and Gold Tribunal - Hyderabad
R. Balakrishnan, Gl. Mgr., Integrated ... vs Cce on 7 January, 1999
Equivalent citations: 2000(89)ECR366(TRI.-HYDERABAD)
ORDER V.K. Ashtana, Member (T)
1. These stay applications are against the Order-in-Original No. 1/98 dated 24.6.1998 wherein a duty demand of Rs. 53,20,821/- has been confirmed and a penalty of Rs. 10,00,000/- imposed on M/s. Integrated Data Systems as well as a penalty of Rs. 50,000/- has been imposed on Shri G.V. Prasath, Director thereof. A further penalty of Rs. 50,000/- has been imposed on Shri R. Balakrishnan, General Manager thereof.
2. The matter concerns the alleged manufacture of Computer Systems by M/s. Integrated Data Systems Ltd., as contained in the show cause notice etc. dated 10.7.1995. The Department alleges that what was purchased by the appellants was merely sub-assemblies of Computer system and these were then assembled into computer system and supplied to Customers. As against this, the appellants urge that they merely indulged in trading activities in as much as that they purchased Computer systems and they may have added some peripherals and software to it. But this activity did not amount to manufacture, particularly in terms of the law laid down by the Hon'ble Supreme Court in the case of ORG Systems, Baroda as reported in 1998 (77) ECR 619 (SC).
3. Since the issue lies on a short compass we grant waiver and stay of the recovery and proceed to consider the appeals themselves at this stage.
4. Learned Advocate Shri Sankaram submits that a number of evidences had been submitted before the Adjudicating authority regarding purchase of working Computer systems from various manufacturers. For example, vide Invoice-cum-Challan No. 013/9293 dated 29.9.1992, they have purchased one PC-AT 286 with a RAM of 1MB, 1 Floppy disk drive, 14 inch Monitor, etc., on payment of Excise duty from M/s. Arihant Micro Computers, Madras. They have submitted a summary of purchases v. sales during the years 1991 and 1995 which shows that they had purchased 398 Computers and sold 405. The statement also shows the other break-ups of trading activities in monitors, peripherals like Printers etc., and other computer components. Learned Advocate also submits a statement showing the correlation of purchases and sales for some sample invoices referred in the show cause notice from which it is clear that it was mere computers already duty paid and purchased from original manufacturers which they sold to certain customers. Learned Advocate submits that the Order-in-Original impugned has recorded that they were purchasing computers from market and assembling the peripherals and components along with the computers to supply computer systems. However, the said order is silent on these claims backed by these evidences. Learned Advocate also submits that when the impugned Order-in-Original was passed, the Adjudicating authority did not have the benefit of the case law of O.R.G. Systems supra. Under these circumstances, the Order-in-original impugned has erroneously concluded that their activity amounted to manufacture of computers.
5. Heard Shri S. Kannan, Learned JDR who reiterates the Order-in-original and submits that what was sold by the appellants was complete Computer systems as has been admitted by the customers. He further submits that the statement of the General Manager was equivocal to the fact that they were assembling and manufacturing Computer systems. However, he concedes that later this ground was sought to be retracted, which retraction has not been accepted by the Learned Commissioner in the said order. Therefore, there are no infirmities in the order.
6. We have carefully considered the rival submissions and records of the case. We find that when the order impugned was passed, the Hon'ble Apex Court's decision in the case of O.R.G. Systems had not been issued. We have considered the said decision of the Hon'ble Supreme Court wherein it has been held that software, peripheral devices and service charges attendant thereto are not to be included in the assessable value if otherwise the computers manufactured were complete computers. The Hon'ble Apex Court has held such a complete computer to be one which has CPU, Etched-in-Software, and Input device, and output device, a monitor and Disk drives. In passing this order, the Hon'ble Apex Court has also relied on the judgment of the Hon'ble Supreme Court in the case of PSI Data Systems as reported in 1997 (68) ECR 377 (SC).
7. We have carefully perused the Order-in-original impugned. We find that the stay order is a non-speaking order because of the following reasons:
(a) Whereas the present appellants had submitted a number of invoices showing purchase of complete computer systems and on the basis of this evidence had submitted that they had merely added peripherals and certain softwares and supplied the same to computers, there is no invoice by invoice examination of this submission in the order.
(b) Whereas the appellants had even at the original adjudicating stage submitted that they had purchased complete Computer systems and had laid evidence in the form of Invoices which even showed payment of Excise duty thereof, (one such specimen having already been noted above), there is no discussion in the said order to how the further activities undertaken by the appellants still amounted to manufacture of a computer system which was then supplied to the customers.
(c) The main tenure of the order impugned is that since complete computer systems was supplied to the customers, they were manufactured by the appellants. We feel it is not enough to rely only on what was supplied. A clear discussion and analysis of the evidence on record is required to show that was manufactured before the question of supplying can be considered. This analysis should have been done in the light of the Supreme Court judgment in the case of PSI Data Systems which had been laid before the Adjudicating authority.
(d) More light has since been thrown by the Hon'ble Apex Court on the question of what amounts to manufacture of computer systems, i.e. to say what is the basic minimum configuration of a working computer system, in the case of ORG Systems wherein the Hon'ble Supreme Court has held that additions on Software and other peripherals as also service charges on this basic minimum configuration shall not be includable in the assessable value thereof. Since this new decision was not available to the Learned Commissioner as a guideline, therefore we feel that this issue needs re-consideration in the light of this clear decision of the Hon'ble Supreme Court.
8. In view of the aforesaid findings, we feel that there is a crying need in this case for re-appreciation of the entire evidence in the light particularly of the Hon'ble Apex Court's decision in the case of O.R.G. Systems supra. We find that the evidence already on record is voluminous and it is not possible for the Tribunal to go into each case of purchase, further adding on the items purchased and sale of hundreds of computers involved in the show cause notice. Therefore, the only option available is to set aside the order impugned and to remand the case for de novo consideration to the Learned Original Adjudicating authority with the directions that firstly, he shall re-evaluate all the evidences on record which the appellants have submitted towards their claim that they have bought out computer systems and merely added peripherals and software which does not amount to manufacture to it, instead amounts to trading; and secondly, while appreciating the said evidences and claim of the appellants that they have only engaged in trading activity, the Learned Original Adjudicating authority shall also keep in view the Hon'ble Apex Court's latest judgment in the case of O.R.G. Systems Ltd., supra which will help him in considering the issue vis-a-vis the minimum basic configuration of a computer system already outlined in the said judgement.
9. The appeals are allowed by way of remand and the stay applications are therefore disposed of accordingly.
(Pronounced and dictated in the open Court).