TaxTMI 
TaxTMI 
2009 (11) TMI 306
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....om April 2002 to November 2006 and equal penalty imposed on it under Section 11AC of the Central Excise Act, 1944. Appeals (No. E/591 and 592/08) filed by Sri S. K. Gupta, Finance Controller and Shri A. K. Srivastava, Senior Manager both of XIL challenge personal penalty of Rs.50,000/- each imposed on them under Rule 26 of Central Excise Rules, 2002. The finding of manufacture by the Commissioner is on the basis that XIL had undertaken assembly of components of photocopiers imported by it into complete photocopiers. This activity was held to be converting an incomplete machine into a complete machine envisaged in Section 6 of Section XVI of the Central Excise Tariff (tariff) and was manufacture. The demand is on the value of the complete ma....
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.... unique identification number to each machine. This was done using the oracle software and the computer system. The goods received in CKD condition in the warehouse were stock transferred in such sets to different depots without disturbing separate packing in which the components of the photocopier machines were received in the warehouse. The finding that the appellants had carried out conversion of incomplete machines into complete machines was without factual basis. No activity that could be described as manufacture was carried out by the appellants. Like a trader who purchases components and sells them in sets, the appellants had received components of photocopier machines from abroad, grouped them in sets of complete machines, assigned ....
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....of components at the option of particular customers. This process constituted manufacture as envisaged in Note 6 of Section XVI of the Central Excise Tariff. The appellants procured indigenous material such as plug pin and replaced the ones attached to the imported module. The- components such as HCF and DADF were incorporated in the main component i.e. work centre where it was necessary. He relied on case laws in support of the case that XIL undertook manufacture before making impugned clearances. 5. We have carefully considered the case records and submissions made by both sides. Vide the impugned order, learned Commissioner found the activity undertaken by the appellants liable to excise duty as follows: 14. I have carefully gone t....
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....ete machine or photocopier. The Sport is of components/modules for specified models of the photocopiers and the manufacture is complete only on assembly of the components and parts m their warehouse at Hyderabad. 16. In their reply, they have failed to show that they had imported a compete machine, which was presented in unassembled form at the time importation to the sake of handling or transportation. A complete machine comes into existence by assembly of various components in their Ware house at Hyderabad. This process is well covered under the provisions of note 6 of section XVI of Central Excise Tariff read with section 2(f) of the Central Excise Act. Therefore the submission that the imported goods are traded as photocopiers is not....
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.... for the assessee explained the statement relied on by the Ld. Special Counsel that the same w to the effect that HCF and DADF were fitted at the factory of the appellant's principals abroad. We find from the records that HCF and DADF were factory fitted; no fitting or assembly of any part took place in the warehouse of the appellants. The transactions involved were receipt of photocopiers in CKD condition; imported, classified, assessed and charged to customs duty and CVD as complete machines of CH 8471. These were cleared from the warehouse in sets of components of complete photocopier machines without undertaking any process whatsoever involving them. The components alleged to have been fitted to the main module were cleared in original ....
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.... 7. The Ld. Spl. Counsel argued that the components imported were assembled in the warehouse by kitting and this operation using the computer sys tem was assembly, though not in a physical sense. This logic seeks to support the finding of the Commissioner that XIL assembled components in the warehouse. However, we find that in a case involving parts of copier machines process of manufacture can only be a physical process. A computer cannot produce any tangible goods such as photocopiers. 8. The Ld. Spl. Counsel for Revenue relied on case laws to support the view that there was manufacture in the process described and cited (i) Xerox Modi Corp Ltd. v. CCE, Meerut-II [2001 (13) E.L.T. 219 (Tri-Del)], (ii) Tanzeem Screenarts v. CCE, Mumb....