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G.R. Sharma

1. By the impugned order No. 1867/CE/CHD/99 dt. 29.10.99, the Commissioner (Appeals) upheld the Order-in-Original passed by Dy. Commissioner confirming demand of Rs. 87,838-50 and imposing a penalty of Rs. one lakh under Rule 173Q of Central Excise Rules read with Section 11AC of the Act. Being aggrieved by this order, the appellants have filed this Appeal No. E/401/2000-D.

2. The facts of the case in brief are that the appellants are engaged in the manufacture of Uninterrupted Power Supply System (UPS). The officers of Central Excise visited the factory premises of the appellant on 16.12.94 they found that during the period 20.3.92 to 13.7.92 the appellants had cleared Lead Acid Batteries valued at Rs. 9,07,600/- involving duty amounting to Rs. 98,838.50. Accordingly, a Show Cause Notice was issued to the appellants asking them to explain as to why duty amounting to Rs. 98,838.50 should not be demanded from them in-as-much as they had not been paying duty on the value of batteries being cleared as part of the UPS system without including the value of the Lead Acid Batteries in the assessable value of the UPS system, why interest should not be demanded under Section 11AB of the Central Excise Act and why penalty should not be imposed under Section 11AC read with Rule 173Q of the Central Excise Rules, 44. In reply to the SCN, the assessee submitted the batteries supplied with the UPS system were nothingelse but a accessories; that the Lead Acid Batteries were exempted during the material period; that the respondents did not apply their mind by stating that the demand pertains to the period April'92 to June'92 whereas in the SCN at one point the period has been shown as April'92 to July'95; that a SCN was issued on 11.3.97; that the entire demand was time barred.

5. Shri B.B. Gujral, Ld. Counsel appears for the appellant whereas Shri Ashok Mehta, Ld. SDR represents the respondent Commissioner.

6. Arguing the case for the appellant, Ld. Counsel submits that the first issue in the instant case was classification of UPS system. he submits that the issue has finally been settled by the Larger bench of this Tribunal in the case of Luminous Electronics Ltd. reported in 2001(129) ELT.605. It was submitted that the supply of battery was optional; that the batteries were being separately supplied also; that whenever any customer did not like to take batteries, he could take the other apparatus; that this clearly shows that batteries were not the core of the system. He submitted that since the supply of the batter was optional, therefore, the question inclusion of the value of the battery in the value of the UPS system was not necessary.

Regarding the batterybeing a bought out item Ld. DR referred to the letter/dt. 27.6.95 of the Managing Director of the Company in which the Managing Director had stated that they were purchasing cells and were assembling batteries. Ld. DR, therefore, submitted that the contention of the appellant that battery was a bought out item, is not supported by the facts on record. he submitted that assembly of individually cells into lead Acit Battery amounts to manufacture; that battery is a new item and was different from cells. He, therefore, submits that batteries were being manufactured by the appellant.

11. Regarding the battery being an accessory, ld. DR submits that it was not an accessory but was an essential part of the UPS system. He submits that battery has been shown as a component in the HSN Notes, He submits that there are decisions of the Apex Court in which it has been held that since the Central Excise Tariff Act is being based on HSN nomenclature, therefore, HSN should be given due importance. Ld. DR, therefore, submits that on merits, the appellants have no case.

12. On limitation Ld. DR submits that the allegation is very clear stating clearly that though battery was being supplied with the UPS system, the value of battery was not being disclosed either in the gate passes or duty paying documents. He submits that the allegation being very clear, the case law cited by the appellant is distinguishable. He submits that in this view of the matter, the limitation does not hit the demand. He, therefore, prays that the appeal may be rejected.