Customs, Excise and Gold Tribunal - Tamil Nadu
Universal Micro Systems vs Commissioner Of C. Ex. And Cus. on 30 June, 1998
Equivalent citations: 1998(62)ECC727, 1999(107)ELT505(TRI-CHENNAI)
ORDER V.K. Ashtana, Member (J)
1. These are two appeals against Order-in-Original No. 42/95, dated 18-12-1995 passed by Commissioner of Central Excise in terms of CEGAT's remand Order No. 202/94, dated 24-8-1994 and wherein the duty demand for Rs. 4,23,672/- and penalty of Rs. 10,000/- on Shri B.J. Bhasin has been confirmed as well as 10 Computer Systems confiscated and allowed on redemption fine of Rs. 2,000/- each.
2. The only points to be considered are :
(a) whether activities carried out by appellants amounted to manufacture of Computer Systems; and
(b) whether penalty is imposable and is correctly on Shri B.J. Bhasin.
An answer to both these questions has more on facts than on law points. Heard ld. Advocate Shri A.K.J. Nambiar for appellants and Shri S. Murugandy, ld. JDR for Revenue.
3. Ld. Advocate argued that all the 32 pieces of Computers alleged to have been manufactured by them were actually purchased from M/s. Pertech Computer Ltd., New Delhi (PCL). Further, they were installed by their Engineers at their unit before they were handed over to them. The only activity done by appellants was to change the logo on the Cabinet to "Dolphin" and sell the same. He contends that this does not amount to manufacture.
4. Ld. JDR stresses that as per evidence on record what was purchased and received were parts; that is why they had to be installed; and since appellants have not been able to produce evidence of duty payment thereon by PCL, therefore duty has been correctly demanded.
5. We have carefully considered the arguments on both sides. We have also examined the Invoice-cum-delivery challan of PCL copy on record. A scrutiny thereof reveals that 2 complete sets of ORBIT PC/ATs were supplied (Invoice No. TVM/88/01, dated 30-8-1988 at page 10 of Paper Book). The invoice is in conformity with the standard practice of mentioning the configuration of the systems supplied. Under the column "Qty" the figures "2 sets" are clearly mentioned. Therefore, mere writing of the configuration does not mean that what was supplied was parts and not the 2 sets of computers.
6. It is alleged in the impugned order that these were supplied in SKD condition. We find that it is again an industry practice to supply computer system in SKD condition inasmuch as that the system board etc. housed in a cabinet is packed separately, the monitor is packed separately, so is keyboard. This is necessary to protect from damage during transport. However, by no stretch of imagination can such SKD delivery be held to mean that only parts/components were delivered and not systems themselves. In fact, this technological necessity further makes it imperative for the seller's Engineer to install it at Customer's site. While doing so he checks the appropriateness of the site (e.g. Air conditioning and power source including earth leakage, etc.) and then after unpacking and connecting all these items, he delivers the working system to the buyer. This activity, in IT industry parlance is called "installation". Thus, it is abundantly clear that Installation is distinct from manufacture. That what was done in this case was mere installation is evident from the "Hardware Installation Record" of PCL at page 11 of Paper Book wherein it is recorded that the power supply was from a dedicated phase, the Air conditioner was operational, power was conditioned through servo-stabiliser and no UPS was used. These are the site details verified. This would be an irrelevant issue if the activity was to manufacture or assemble computers out of parts. Thereafter, the said records shows that 6 computer systems with specific Sr. Nos. were installed and delivered on a single day by a single person, i.e. on 3-9-1988. Obviously, one person cannot manufacture (assemble) 6 computer systems on one day and that too at the customer's site. We further find that the impugned order-in-original has not considered these evidences in detail.
7. It is also alleged that the appellants could not produce proof of payment of duty on these deliveries of M/s. PCL. We find that the burden of proving non-duty paid character of any goods sold in the market in the ordinary course of business is on the department and not on the buyer. The records of the case do not show that any enquiries were made from PCL on this issue, it is this accepted position in law, which has also led to the issue of numerous Central Excise duty exemption notifications which contain explanations that goods purchased in open market would be deemed to have been duty paid unless it is proved to the contrary. Therefore this allegation also does not survive.
8. We note that neither Revenue nor the appellants have produced all the invoices etc. on which these equipment were received. As the matter was remanded once already, we feel it would be further delaying justice, if we remand it again for a 100% verification of facts in the light of the above observtions. We also take note that this matter is already ten years old. Therefore, in the interests of justice, we accept these 2 evidences as representing the full transactions of 32 sets.
9. In view of the aforesaid findings, and taking all the facts and circumstances of the case, we hold that mere affixing of label of "Dolphin" on ready-to-use and installed computer systems does not amount to manufacture. The demand for duty, redemption fine and penalty are hence liable to be set aside. Therefore we set aside the impugned Order-in-Original and the appeal succeeds with consequential relief.