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TMI Blog2007 (6) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... rm was constituted in the year 1993 and was engaged in trading and servicing of computers and peripherals thereof since then. M/s. CCS Infotech Ltd. [CCSIL for short] are a public limited company incorporated in the year 1997 with a Board of Directors including S/Shri Hasan Abdul Kader and Ratna Kumar. The company acquired the business of the firm under a Deed of Acquisition dated 2-4-2001, but this acquisition was nullified in an Arbitration Order dated 28-8-2003 which was not challenged by any of the parties. In the impugned order, learned Commissioner found that during the period from August, 1998 to March, 2000, M/s. CCS clandestinely manufactured computers and cleared the same without payment of duty and that M/s. CCSIL also indulged i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or enhancing the capacity of hard disc drive did not amount to 'manufacture' under Section 2(f) of the Central Excise Act, nor did the activity of affixing brand name to such computer amount to 'manufacture' under the said provision of law, and the Commissioner's finding that they were engaged in the assembly of computers out of bought out components is arbitrary and contrary to his own observations recorded in the impugned order; and (e) they had believed bona fide on the basis of the C.B.E. & C's Circular No. 454/20/99-CX., dated 12-4-99 that upgradation of computer was only a trading activity which did not amount to 'manufacture' under Section 2(f) of the Central Excise Act and there fore they were not liable to pay any duty of excise on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ones manufactured and cleared by the appellants. In this connection, she has also contested the appellant's plea of bona fide belief. 4. We have given careful consideration to the submissions. Learned Commissioner framed two issues as follows (i) Whether the activities performed by CCS/CCSIL [as reflected in the Job Cards] would amount to 'manufacture' within the scope of Section 2(f) of the Central Excise Act, 1944; and if so, (ii) Whether the duty payable by CCS can be recovered from CCSIL in addition to its own liability under a common show-cause notice. Dealing with the first question, learned Commissioner found, after a scrutiny of the 'Job Cards', that the following activities were sequentially per formed by M/s. CCS/CCSIL : (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould then be tested with the diagnostic software for its performance and will be certified as 'Quality Check Passed' in the job card. Subsequently, the Quality Check Department will allocate and affix serial numbers on all such CPUs. Their brand-name will also be affixed on the CPUs if required by the customers. The input and output devices like monitor, keyboard, mouse, modem etc., which were either originally received during the purchase of the base machine or held as inventory stock, would also be supplied along with the CPU to the customer. The computers will not be subjected to Quality Check if sold without brand name or under others' brand names. Similarly, only the sale of computers under their own brand-name will be covered by warra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have found no correlation between the entries in ANNEXURE - F with those in ANNEXURE - S-I. In the result, Revenue has failed to demolish the appellants' case that they were only engaged in the activity of upgrading boughtout computers to the specifications of their customers, which was essentially a trading activity. The respondent has not cited any Chapter Note in Chapter 84 of the First Schedule to the Central Excise Tariff Act or any Section Note in the relevant Section of the Tariff Schedule making such upgradation of computers deemed manufacture for the purpose of levy of duty of excise. No such deeming provision has been cited in respect of affixture of brand name on boughtout computers either. In the result, it has not been esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon' show-cause notice, as if show-cause notice was issued to the firm also. As a matter of fact, no show-cause notice was issued to the firm. To fix duty liability on a person without issuing show-cause notice to him is against the basic tenet of the rule of natural justice. Assuming that M/s. CCS were held liable to pay duty on the computer systems cleared by them during the above period in adjudication of a show-cause notice duly issued to them, it would still be incumbent on the adjudicating authority to state valid reason as to why such duty is recoverable from a different entity viz. M/s. CCSIL. It is on record that the firm was started in the year 1993 by S/Shri Hasan Abdul Kader and Ratna Kumar and they were into the trading activi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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