2016 (11) TMI 312 - AT - Central Excise

Tribunal rules in favor of appellant on duty evasion case due to time-barred penalties

The Tribunal set aside the Order-in-Original demanding duty on the main appellant for allegedly evading Central Excise duty on computer systems assembled ... Manufacturing by on-site assembly - limitation / time-bar of demand - penalty under Section 11AC not imposable in absence of allegation of fraud, collusion or suppression with intent to evade duty - precedential effect of an earlier Tribunal finding in the same matterManufacturing by on-site assembly - Activity of assembling computer systems at customers' sites is held to be manufacturing. - HELD THAT: - The Tribunal, applying the settled view of the Apex Court, accepts that the assembly of computer systems at the site of customers amounts to manufacture. The appellants' contention that such activity is not manufacturing was rejected on merits. [Paras 6]Assembly of computer systems at site constitutes manufacturing and the demand on merits for such activity is not unsustainable on the ground that it is not manufacture.Limitation / time-bar of demand - penalty under Section 11AC not imposable in absence of allegation of fraud, collusion or suppression with intent to evade duty - precedential effect of an earlier Tribunal finding in the same matter - Impugned demand and penalties are unsustainable as time-barred because the show-cause notice contained no allegation of fraud, collusion, mis-statement or suppression with intent to evade duty; the Tribunal follows its earlier finding in the same proceedings and sets aside the impugned order on limitation. - HELD THAT: - On limitation the Tribunal relied on an earlier bench's reasoning in the same matter which observed that the show-cause notice did not allege fraud, collusion, mis-statement, suppression of fact or contravention with intent to evade duty and therefore the mandatory penalty under Section 11AC could not be invoked. Both parties were unable to say whether Revenue had appealed against that Tribunal order. Respectfully following the earlier finding that there was no allegation of fraud or suppression with intent to evade duty, the Tribunal held the impugned order unsustainable on the ground of limitation and set it aside. The Tribunal therefore allowed the appeals in the peculiar facts and circumstances of the case. [Paras 7, 8, 9, 10]Impugned order set aside on limitation; appeals allowed.Final Conclusion: The Tribunal held that assembly of computer systems at customers' sites is manufacturing but, on the specific factual finding in a prior Tribunal order that the show-cause notice contained no allegation of fraud, collusion or suppression with intent to evade duty, the demands (and attendant penalties) were held time-barred; the impugned order was set aside and the appeals allowed. Issues:Demand of duty on the main appellant for alleged evasion of Central Excise duty on computer systems assembled at clients' sites from bought-out items during 1993-94 to December 1997; Contesting imposition of penalties; Allegations of limitation due to lack of fraud, collusion, misstatement, suppression of fact, or contravention of provisions to evade payment of duty.Analysis:The appeals were against an Order-in-Original passed by the Commissioner of Central Excise, Mumbai - V, regarding the demand of duty on the main appellant for allegedly evading Central Excise duty on computer systems assembled at clients' sites. The adjudicating authority confirmed the demands with interest and imposed penalties under Section 11 AC and Rule 173Q of the Central Excise Act 1944. The appellants contested the penalties, arguing that the demands confirmed were time-barred due to the absence of allegations in the show cause notice related to suppression or clandestine removal of goods. They relied on a previous Tribunal decision that held the demand was hit by limitation due to lack of specific allegations.The Tribunal found that the activity of assembling computer systems at clients' sites constituted manufacturing, as determined by the Apex Court. The argument presented by the appellants that this activity did not amount to manufacturing was deemed unacceptable. However, on the issue of limitation, the Tribunal noted that in a previous Revenue appeal related to the same order-in-original, it was held that there were no allegations of fraud, collusion, misstatement, or suppression of fact to invoke penalty under Section 11AC. As a result, the penalty imposed by the Commissioner was upheld. The Tribunal, in line with the previous decision, found that the impugned order was unsustainable solely on the ground of limitation.Despite being unable to confirm if Revenue had filed an appeal against the previous Tribunal decision, the bench held that since there was no fraud, collusion, or suppression with intent to evade duty in the case, the impugned order was set aside on limitation grounds, and the appeals were allowed. The Tribunal's decision was based on the absence of specific allegations that would warrant the imposition of penalties under Section 11AC, leading to the setting aside of the impugned order solely due to limitation issues.