2005 (2) TMI 144 - SC - Central Excise

Court rules monitors and printers not essential for computer duty classification. Manufacturer's excisable products.

COMMISSIONER OF CENTRAL EXCISE, MUMBAI Versus C.M.S. COMPUTERS P. LTD.

The Supreme Court dismissed the appeal, affirming the Tribunal's decision that monitors and printers are not essential parts of a computer system for duty ... Whether monitors and printers were part of the computers? Whether the Respondents are entitled to the benefit of Notification No. 175/86-C.E., dated 1st March, 1986? Held that:- The Respondents do not manufacture the monitor or the printer. On facts it could not be disputed that in approximately 70% of the cases monitors and printers are not supplied along with the computer sold by the Respondents. Thus, it cannot be concluded that Respondents sell their computer as a unit which include a monitor and a printer. As a monitor and printer are not essential parts of the computer their value cannot be included in the value of computer. We, however, clarify that situation may be different where a manufacturer sells a computer with a monitor and a printer as a unit. As seen, the Notification is granting an exemption provided that the aggregate value of clearances of all excisable goods does not exceed ₹ 150 lakhs in the preceding year. The value, therefore, necessarily has to be in respect of clearances of goods manufactured by the Respondents which admittedly in this case are only the CPUs and the keyboard. Therefore, for the purposes of this Notification the value of traded items like monitors and printers was not to be included. Tribunal was right in holding that the demand was barred inasmuch as the classification list had been approved. Appeal dismissed. Issues: Classification of monitors and printers in computer systems; Entitlement to benefit of Notification No. 175/86-C.E.Classification of Monitors and Printers:The case involved a dispute over whether monitors and printers should be considered essential parts of computer systems for duty classification purposes. The Respondents, who manufactured mini computer processing systems, did not manufacture monitors and printers but supplied them to customers if required. The Tribunal set aside a demand claiming that monitors and printers were part of the computers, stating that the demand was beyond the time limit under Section 11(A). The Supreme Court analyzed that monitors and printers are peripheral items, not essential parts of a computer. The Court clarified that even though monitors and printers may be classifiable under the same tariff heading as computers, they are excisable products in the hands of their manufacturer. As the Respondents did not sell computers as a unit including monitors and printers in 70% of cases, the value of monitors and printers could not be included in the value of the computer.Entitlement to Benefit of Notification No. 175/86-C.E.:The Court also addressed whether the Respondents were entitled to the benefit of Notification No. 175/86-C.E., which granted an exemption if the aggregate value of clearances of all excisable goods did not exceed Rs. 150 lakhs in the preceding year. The Revenue argued that including the cost of monitors and printers would push the total turnover beyond the limit. However, the Court interpreted the Notification to apply only to goods manufactured by the Respondents, which were CPUs and keyboards in this case. Since the value of traded items like monitors and printers was not to be included for this Notification, the turnover did not exceed the limit. Additionally, the Court upheld the Tribunal's decision that the demand was barred as the classification list had been approved, and all facts were known to the Department within the limitation period.In conclusion, the Supreme Court dismissed the appeal, stating that there was no reason to interfere with the Tribunal's decision. The judgment provides clarity on the classification of monitors and printers in computer systems and the application of duty exemption notifications based on the value of goods manufactured by the Respondents.