Custom, Excise & Service Tax Tribunal
M/S. Novo Computer Shopee vs Commissioner Of Central Excise ... on 7 February, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/1023/2006-DB [Arising out of Order-in-Appeal No. 353/2006 dated 16.6.2006 passed by Commissioner of Central Excise and Customs, Cochin 18.] M/s. NOVO Computer Shopee Prop. Bindu Sen NAS Buildin Arakkuzha Road Muvattupuzha Appellant(s) Versus Commissioner of Central Excise (Appeals) CR BUILDINGS, Cochin 682 018. Respondent(s)
Appearance:
Mr. Raghavendra B. Hanjer, Advocate For the appellant Mr. Mohammed Yousuf, AR For the respondent Date of Hearing: 31/01/2017 Date of Decision: 07/02/2017 CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER HON'BLE SHRI V. PADMANABHAN , TECHNICAL MEMBER Final Order No. 20215 / 2017 Per : V. PADMANABHAN The appellant was engaged in the trading of computer systems and accessories under the brand and style (NOVO). The Central Excise officers visited the unit on 20.11.2005 and commenced investigation into the affairs of the appellant. After due process of law, the original authority confirmed demand of excise duty to the tune of Rs.2,75,563/- along with penalty of equal amount and interest applicable thereon, on the ground that the appellant has undertaken manufacture of computers with the brand name of NOVO which belonged to another person. Consequently, the appellant was also denied the benefit of small scale industry exemption Notification. Against the order confirming the demand for the period 2.10.2000 to 9.11.2001, the appellant filed appeal before Commissioner (A), who upheld the original order. Hence the present appeal.
2. With the above background, we heard Shri Raghavendra Hanjer, learned advocate for the appellant as well as Shri Mohammed Yousuf, learned AR for the Revenue.
3. The learned advocate emphasised the following grounds of appeal.
(i) The appellant has not undertaken manufacture of computers. They have only engaged in the activity of trading of various components of computers. They also denied that connecting together by assembling various components of computers, will not amount to manufacture of computers.
(ii) The Revenue has not produced any evidence of such manufacture. The entire case is built only on the statement recorded from the proprietrix Smt. Bindu Sen, which is not corroborated with any other evidence. No goods have been seized but only stickers with the name NOVO have been seized.
(iii) The brand name NOVO belongs to Novo Computers Pvt. Ltd., which is a firm, in which the brother of the proprietrix is the Managing Director. There is nothing on record to suggest that M/s. NOVO Computers Pvt. Ltd. has objected to the use of the brand name NOVO by the appellant. He also challenged the demand on the ground of limitation.
4. Learned DR supported the impugned order. He argued that it has been held in many decisions that assembly of various components of computer include the computer system brings into existence new product falling under 8471 and will be liable to payment of excise duty. He also argued that the appellant will not be entitled to the SSI benefit since the relevant Notification denies the benefit, if the goods are cleared bearing the brand name of another person.
5. The issue arising in the present appeal are: (i) whether the activities of the appellant can be construed as manufacture and thus duty can be demanded; (ii) whether the SSI concession can be denied in this case by holding that the brand name owned by another person has been used by another person.
6. The issue whether assembling various components of computer include computer system amounts to manufacture has been examined by the Tribunal in a recent decision vide Final Order No.20197-20198/2017 dated 6.2.2017 in the case of Lampo Computers Pvt. Ltd., in which it has been held that such activity will not amount to manufacture. In the above decision, the Tribunal has held as follows:
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 84.71 at the relevant time is reproduced below for ready reference:-
Heading Sub-heading Description of goods Rate of duty 84.71 8471.00 Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included 16% Further the relevant chapter note to Chapter 84 dealing with the classification of goods under chapter 84.71 is also reproduced below:-
5(a) For the purpose of heading No.84.71, the expression automatic data processing machines means:-
(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 their execution, by logical decision during the processing run;
(ii) Analogue machines capable of simulating mathematical models and comprising at least : analogue elements, control elements and programming elements;
(iii) Hybrid machines consisting of either a digital machine with analogue elements or an analogue machine with digital elements.
(b) Automatic data processing machines may be in the form of systems consisting of a variable number of separate units. Subject to paragraph (e) below, a unit 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 heading 84.71.
(d) Printers, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of paragraphs (b)(i) and (b)(ii) above, are in all cases to be classified as units of heading No.84.71.
(e) Machines performing a specific function other than data processing and incorporating or working in conjunction with an automatic data processing machine are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings.
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 lap top or a notebook computer which will be a ADP machine in which the various components are built in and functioning as a system. We also have the example of a desk top computer where the various components such as CPU, monitor, hard disc drive etc. each one being classifiable under 84.71 as a separate unit are connected together to form a system to carry out the function of an ADP machine. It is noteworthy that both the separate units as well as the system brought about by interconnection remain 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 units of computer system. This has been laid down as the test for manufacture by the Apex Court in the DCM case. Further we note that each of the components bought out by the assessee is separately duty paid. Though the Revenue has not gathered specific evidence of assembly of various components into an ADP machine by the assesse, the thrust of the case is that the assessee has undertaken such activity which is claimed to be an act of manufacture.
6.4 The Revenue has already clarified vide their Circular No.497/63/99-CX dt. 30/11/1999 that the activity of creating a computer network from duty paid 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. We are of the view that the above clarification, though not strictly applicable to the present facts of the case, however, the analogy can be adopted. The Tribunal in the case of CCE, Ahmedabad Vs. Macro Tech P. Ltd. [2008(231) ELT 59 (Tri. Ahmd.)] has taken the view that buying various computer parts and installing the same by assembling will not amount to manufacture. This has been further followed in certain other judgments. On the other hand, Revenue has pointed out several decisions wherein the Tribunal has taken a contrary view. However, we find that those decisions are all prior to the 2008 decision of the Tribunal, except the decision of the Tribunal in the Leo Circuit Boards Pvt. Ltd. (supra) relied upon by the Revenue. This is reported in 2015. However, we find that the issue involved in the case is totally different and involves construction of a machine classified under 84.70 using ADP and other components. Since facts are not identical, we are of the view that the same is not applicable to the facts of the present case.
7. In view of the above discussions, we conclude that the activities of assembling of various components of computers into a working computer system will not amount to manufacture and hence are not liable to payment of excise duty. Consequently there is no need to discuss the issue of brand name and SSI benefit. In view of the above, the impugned order is set aside and the appeal is allowed.
(Order is pronounced in Open Court on 07/02/2017.) V. PADMANABHAN TECHNICAL MEMBER S.S GARG JUDICIAL MEMBER rv 8