2016 (11) TMI 312 - AT - Central Excise

Manufacture - computer system assembled at the site of their clients from bought out items - limitation - penalty under Section 11AC - Held that - On perusal of the records, we find that the demands raised with interest are in respect of the computer systems assembled at the site of customers. This activity is held as manufacturing by the Apex Court. On merits, the argument of the appellants is unacceptable to us that is not manufacturing computer system. On limitation, we find that appellant has a case in their favour, as against the very same impugned order, in Revenue s appeal, the bench while dismissing the appeal, held that there is no fraud, collusion or suppression with intent to evade duty. Thus we hold that the impugned order is unsustainable only on the ground of limitation. - Decided in favour of assessee

Summary

Issues:
Demand of duty on the main appellant for alleged evasion of Central Excise duty on computer systems assembled at clients' sites from bought-out items during 1993-94 to December 1997; Contesting imposition of penalties; Allegations of limitation due to lack of fraud, collusion, misstatement, suppression of fact, or contravention of provisions to evade payment of duty.

Analysis:
The appeals were against an Order-in-Original passed by the Commissioner of Central Excise, Mumbai - V, regarding the demand of duty on the main appellant for allegedly evading Central Excise duty on computer systems assembled at clients' sites. The adjudicating authority confirmed the demands with interest and imposed penalties under Section 11 AC and Rule 173Q of the Central Excise Act 1944. The appellants contested the penalties, arguing that the demands confirmed were time-barred due to the absence of allegations in the show cause notice related to suppression or clandestine removal of goods. They relied on a previous Tribunal decision that held the demand was hit by limitation due to lack of specific allegations.

The Tribunal found that the activity of assembling computer systems at clients' sites constituted manufacturing, as determined by the Apex Court. The argument presented by the appellants that this activity did not amount to manufacturing was deemed unacceptable. However, on the issue of limitation, the Tribunal noted that in a previous Revenue appeal related to the same order-in-original, it was held that there were no allegations of fraud, collusion, misstatement, or suppression of fact to invoke penalty under Section 11AC. As a result, the penalty imposed by the Commissioner was upheld. The Tribunal, in line with the previous decision, found that the impugned order was unsustainable solely on the ground of limitation.

Despite being unable to confirm if Revenue had filed an appeal against the previous Tribunal decision, the bench held that since there was no fraud, collusion, or suppression with intent to evade duty in the case, the impugned order was set aside on limitation grounds, and the appeals were allowed. The Tribunal's decision was based on the absence of specific allegations that would warrant the imposition of penalties under Section 11AC, leading to the setting aside of the impugned order solely due to limitation issues.