Manufacture and excise demand on SMPS failed where duty-paid procurement and no evidence of assembly were shown.

Duty could not be confirmed on 39 SMPS where the appellant was registered as a dealer and the purchase invoices showed procurement from UTL on payment of duty. Revenue adduced no evidence that the supply of additional items created a new excisable product or that any activity in the appellant's premises amounted to manufacture. No investigation or statement established the alleged assembly. On these facts, the excise demand failed and the penalty under Section 11AC also had no foundation.

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Issues: Whether duty could be confirmed on 39 SMPS on the footing that the appellant had manufactured and cleared them without payment of duty, and whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable.

Analysis: The period in dispute was when the appellant was registered as a dealer and was engaged in trading of rectifiers and SMPS. The purchase invoices showed procurement of SMPS from UTL on payment of duty. The Revenue did not adduce evidence that the supply of additional items along with the SMPS resulted in emergence of a new product or that any activity in the appellant's premises amounted to manufacture. No investigation or statement established assembly of the kind alleged in the impugned order. On these facts, the demand could not be sustained, and the basis for penalty also failed.

Conclusion: The duty demand and penalty were not sustainable and were set aside in favour of the assessee.

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