2005 (7) TMI 219 - AT - Central Excise

Valuation (Central Excise) - Demand duty - extended period of limitation - HELD THAT - Since the plotter, printer and UPS cannot be called as essential parts of a computer, we hold that their value cannot be added. Secondly investigation conducted by the department does not reveal that the appellants manufactured the above said peripherals. Clearly they are bought out items. The ld. DR's contention that when all the peripherals are supplied along with the computer as one unit their value should be added is not acceptable as that can be done only when they are essential parts of the computer. The appellant's contention that they entertained a bona fide belief that they were not required to pay duty on the goods manufactured by them is devoid of any merit. A blind belief cannot substitute bona fide belief. In regard to the contention that no demand could be made on computers sold during the period 89-90. We observe that the show cause notice issued in 1994 covered the period from November, 1989. Thus the period of five years covers November, 1990 clearances. For the goods cleared in October an assessee is required to file a return in November. The relevant date for computation of the period of limitation is the date of filing of return and not the date of clearance of the goods. The appellants have also raised a contention that the Commissioner erred while computing the demand inasmuch as he has not considered the fact that the price at which the goods are sold is a cum duty price. The appellants rely on the decision of the Supreme Court in the case of Srichakra Tyres Ltd. v. CCE 1999 (3) TMI 100 - CEGAT, NEW DELHI wherein the Supreme Court held that even in case of clandestinely removed goods, assessable value has to be worked out after giving allowances to statutory duties that are leviable on such goods. We find merit in the contention the duty has to be recomputed in the light of the decision of the Supreme Court cited supra. Thus, we hold that the value of the peripheral have to be excluded from the assessable value of the computers alleged to have been removed without payment of duty. We hold that extended period of limitation is applicable. We hold that the price at which the computers are sold has to be treated as cum duty price, and the actual duty payable has to be calculated in the light of the Supreme Court's decision cited supra. Penalty has to be re-determined. Interest u/s 11AB is not demandable as the case pertains to a period prior to September, 1996.

Summary

Issues:
1. Central Excise duty demand confirmation
2. Penalty imposition under Rule 173Q
3. Confiscation of assets
4. Interest demand under Section 11AB
5. Inclusion of peripherals' value in assessable value
6. Procurement of computers from vendors
7. Extended period of limitation applicability
8. Computation of duty on cum duty price
9. Penalty redetermination
10. Interest demand prior to September 1996

Central Excise Duty Demand Confirmation:
The appeal arose from the Commissioner's order confirming a Central Excise duty demand of Rs. 11,01,943.92 under Section 11A. The appellant company was penalized Rs. 3 lakhs under Rule 173Q, with assets confiscated and a fine imposed. Interest under Section 11AB was demanded for the period 1-10-89 to 25-3-94. Notably, it was clarified that interest is not demandable for the period before 26-9-96.

Inclusion of Peripherals' Value in Assessable Value:
The dispute centered around whether the value of peripherals supplied with computers should be added to the assessable value. The appellants argued that peripherals like printers, UPS, and plotters were not essential parts of the computer and their value should not be included. Citing a Supreme Court decision, it was held that the value of non-essential peripherals cannot be added to the computer's value. It was also established that the appellants did not manufacture these peripherals but procured them from vendors, making them bought-out items.

Procurement of Computers from Vendors:
The appellants contended that duty should not be paid on computers procured from vendors and resold. The Commissioner considered evidence provided by the appellants, acknowledging instances where computers were bought from vendors. The appellants' argument of a bona fide belief exempting them from duty payment was rejected, emphasizing that a blind belief cannot be equated to a bona fide belief. The extended period of limitation was deemed applicable, covering clearances made within the specified timeframe.

Computation of Duty on Cum Duty Price:
Regarding the computation of duty, the appellants argued that the duty should be calculated based on the cum duty price at which the computers were sold. Citing a Supreme Court decision, it was concluded that even in cases of clandestinely removed goods, the assessable value must consider statutory duties leviable on such goods. Consequently, the duty was to be recomputed in line with the Supreme Court's ruling.

Penalty Redetermination and Interest Demand:
The judgment necessitated the exclusion of peripheral values from the assessable value, application of the extended period of limitation, calculation of duty on a cum duty price basis, and redetermination of the penalty. It was clarified that interest under Section 11AB was not demandable for the period preceding September 1996.

Dismissal of Appeal and Disposal:
One appeal was dismissed for not being maintainable as it was against a communication from a Deputy Commissioner. Another appeal was disposed of by way of remand. The judgment emphasized the specific nature of appealable orders and the criteria for maintainability.

Final Verdict:
The judgment concluded by pronouncing the operative part in court, outlining the decisions on the various issues discussed during the case.