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Issues involved: Classification of UPS system, inclusion of Lead Acid Batteries in assessable value, time limitation for demand, imposition of penalty under Rule 173Q and Section 11AC.
Classification of UPS system: The appellants argued that Lead Acid Batteries were accessories, not manufactured by them, and their supply was optional, citing relevant case law. They contended that since batteries were optional, their value should not be included in the UPS system's value. Inclusion of Lead Acid Batteries: The Departmental Representative argued that batteries were essential components of the UPS system, not optional, and referred to evidence contradicting the appellants' claim that batteries were bought out items. It was contended that batteries were being manufactured by the appellant. Time limitation for demand: The appellants claimed that the demand was time-barred as the Show Cause Notice (SCN) was issued beyond the statutory period. They cited case law emphasizing strict interpretation of the proviso to Section 11A(1) of the Central Excise Act regarding wilful misstatement to evade duty. Imposition of penalty: A penalty was imposed under Rule 173Q and Section 11AC. However, it was noted that Section 11AC came into effect after the period in question, rendering the penalty unsustainable. The absence of apportionment of penalty under Section 11AC and Rule 173Q led to the conclusion that the penalty imposition was not legally valid. This judgment by the Appellate Tribunal CEGAT, New Delhi, upheld the demand for duty on Lead Acid Batteries in the UPS system, rejected the appeal on merit, found the demand not time-barred, and deemed the penalty imposition unsustainable due to legal inconsistencies.
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