1988 (8) TMI 289 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of technical service charges in the assessable value of computers for Central Excise duty.
2. Limitation period for demanding duty.
3. Imposition of penalty.
4. Gross price consideration.
5. Jurisdictional issues regarding the place of preparation of goods.

Summary:

1. Inclusion of Technical Service Charges:
The primary issue was whether technical service charges recovered by the respondents from their customers, but not disclosed to the department, were includible in the assessable value of computers sold by the respondents for the charge of Central Excise duty. The Assistant Collector included these charges based on the Supreme Court's judgment in M/s. Bombay Tyres International Limited, invoking a 5-year time limit for demanding duty and confirming demands for differential Central Excise duty amounting to Rs. 99,60,141.89. The Collector (Appeals) set aside this order, stating that technical service charges were for optional professional services and not related to manufacturing or marketing of computers. The Tribunal referred to its earlier judgment in the Sunray Computers case, which differentiated between includible and excludible service charges, and remanded the matter to the Assistant Collector for re-determination of the value.

2. Limitation Period:
The respondents argued that they had disclosed the service activity to the department, but the Tribunal found that proper disclosure was not made to the competent officer until 14-5-1984. Therefore, the extended time limit of 5 years was justified till that date, and the normal time limit of 6 months would apply thereafter.

3. Imposition of Penalty:
The respondents contended that the penalty of Rs. 250/- should not be imposed as the later show cause notices did not propose a penalty. The Tribunal disagreed, stating that the later notices were addendums to the earlier ones, which had invoked the penalty clause. Since the respondents were found guilty of suppression of facts till 14-5-1984, the token penalty was confirmed.

4. Gross Price Consideration:
The respondents requested that the includible part of technical service charges be considered as gross receipts or cum-duty price, and the duty payable be calculated accordingly. This request was deemed reasonable and allowed by the Tribunal.

5. Jurisdictional Issues:
The respondents raised a new plea regarding the jurisdiction, stating that the goods (such as floppies) through which software was supplied were prepared at places other than their Mysore factory. The Tribunal agreed with the department's suggestion that the Assistant Collector should determine the facts and deal with this point during the remand.

Conclusion:
The Tribunal confirmed the penalty of Rs. 250/- but set aside the lower orders relating to the duty demand. The matter was remanded to the Assistant Collector to re-determine the differential duty payable by the respondents in light of the Sunray Computers case and the Tribunal's observations. The appeal was disposed of accordingly.