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TMI Blog2017 (5) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 38,21,398/- as worked out in respect of 397 computer systems. The modus operandi has been corroborated in the statement of Shri R. Balakrishnan, then General Manager of the appellant (second appellant herein) wherein he admitted in his voluntary statement dt. 25.01.1995 that they were clearing fully assembled workable computer systems to the customers against orders, but, however, splitting the orders while issuing invoices as per instructions of company Directors - none of the customers or officials of the appellant from whose statements have been recorded have subsequently retracted their say. The activity carried out by the main appellant is nothing but manufacture of computer systems on which duty at applicable rate is very much liable to be discharged. We therefore find no infirmity with the findings of the adjudicating authority on this score. In the event, no merit is found in the appeals with respect to duty demand of ₹ 38,21,398/- on Integrated Data Systems. Penalties - Held that: - The imposition of penalty should always be proportionate and commensurate with the acts of omission and commissions of the persons concerned and should also have some be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii. Shri R. Balakrishnan, General Manager dated 25.1.1995 where inter alia he stated that he was following the procedure of issuing different invoices, as per the directions of the Directors of IDS. iii. Statements given by various customers of IDS, who are senior and high ranking officers of Public Sector banks and reputed organizations and Govt undertakings, wherein they admitted that they always placed orders for the completed system and the same were received by them in fully assembled condition. 5. appellant filed appeal with the CEGAT vide Appeal No.E/1648-1649/98 and E/2776-2777/98, CEGAT by Final Order No.75 76/99 dt. 07.01.1995 disposed of the party appeal by setting aside the order Impugned and remanding the case with directions for de novo consideration. 6. Base on above order, the Commissioner, Hyderabad-II Commissionerate vide Order-in-Denovo No.09/2007-C.Ex. dt. 30.03.2007 has confirmed the following : i. Duty demand of ₹ 38,21,398/- ii. Penalty of ₹ 38,00,000/- on IDS under rule 9 (2), 52-A, 173Q AND 226 of Central Excise rules, 1044 iii. Penalty of ₹ 1,00,000/- on Director, ₹ 1,00,000/- on Shri R. Balakrishnan, G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case was remanded by the Hon ble Tribunal for de novo consideration on hearing the appeals filed be the main Appellant as well as by the Appellant, against the Orders-in-Original No.01/98 dated 24.06.1998. It is submitted that in those order, penalty of ₹ 10,00,000/- for the appellant and ₹ 50,000/- on Shri G.V. Prasad, ₹ 50,000/- on Shri. R. Balakrishnan was imposed upon the Appellant. Thus, the Ld. Commissioner, in the impugned order has enhanced the penalty imposed on the Appellant. It is submitted that the enhancement of penalty has to be held to be unsustainable by the Hon ble Tribunal in the case of Sarjoo Sahkari Chini Mills Ltd. v. CCE, 2008 (226) E.L.T. (Tri.-Del.) in the case the Hon ble Tribunal held that enhancement of penalty was not sustainable in the remand proceedings. (vii) The appellant also relied on a number of case laws in support of their submissions. 9. On the other hand, Revenue represented by Ld. A.R. Shri P.S. Reddy (DC), supported the adjudication and in particular, made the following submissions : (i) the adjudicating authority relied upon purchase orders placed by various customers of IDS and concluded that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture but would be a trading activity and the notice has submitted purchase and sale invoices in support of their claim. I have done invoice by invoice examination. I have observed that during the subject period out of the total clearances done by the IDS, totally 397 computer systems amounting to ₹ 2,33,76,182/- were supplied to the customers after buying various items from different vendors and supplying them; 69 computers were purchased and sold as such; 47 computers were purchased and sold by adding monitors only and; 29 peripherals were traded as such. .. 10. As regards to the valuation of the computer systems manufactured and cleared by the notice. I have gone through the case laws quoted and relied by IDS viz., O.R.G. systems Vs CCE, Vadadora [1998 (102) ELT3(SC), PSI Data Systems Ltd. Vs.[1997 (68) ECR 37 (SC)], Commissioner vs C.M.S. Computers P. Ltd [2005 (182) ELT 20 (SC)] etc. As per CESTAT s direction I have re-evaluated the issue of valuation in the subject case in light of Hon ble Apex Court s decision in the case of ORG Systems. I find that the apex court has finally settled the issue as to what constitutes a computer and its perip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore and retrieve digital information using one or more rigid, rapid disc coated with magnetic material, only difference being that in the earlier computer systems, the capacity and performance of the then HDDs were exponentially lower than those in the present era. 10.8 This being so, we are unable to appreciate ld. Advocate s contention that an HDD was not essential for a computer system. 10.9 What that comes to the fore is that appellants obviously were following an ingenious modus operandi of camouflaging their manufacturing activities in the guise of trading. In the process, they were issuing split invoices purporting to be parts and components of computer systems while actually clearing fully assembled workable computer systems which they subsequently installed at the premises of their customers. Thus a fraud was perpetuated by the appellant to deprive the exchequer of duty liability amounting to ₹ 38,21,398/- as worked out in respect of 397 computer systems. 10.10 having been failed in their well laid plans to evade duty liability, the appellants are now seeking to escape such liability by an elaborate diversion into technical matters related to computer system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of IDS and ₹ 50,000/- on Shri r. Balakrishnan, the second appellant herein. The appellants are aggrieved that penalties have been enhanced without any justification in the de novo adjudication to ₹ 38,00,000/- and ₹ 10,00,000/- respectively. We find merit in this contention. 14.2 The imposition of penalty should always be proportionate and commensurate with the acts of omission and commissions of the persons concerned and should also have some bearing on the quantum of duty or tax that has been short paid or not paid on account of such acts of omission and commissions. 14.3 In the present case, in the first round of adjudication, the duty demand confirmed was ₹ 53,20,821/-, which has in fact been reduced to ₹ 38,21,398/- in de novo adjudication. 14.4 there is also no new discussion or facts concerning any enhanced role of these appellants in abetting this duty evasion. 14.5 Further, no reasons have also been adduced by the de novo adjudicating authority for such arbitrary enhancement of penalties and ratio of Tribunal s decision in Sarjoo Sahkari Chini Mills Ltd. Vs. CCE Noida 2008 (226) ELT 211 (Tri.-Del.) has been correctly reli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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