TaxTMI 
TaxTMI 
2017 (5) TMI 598
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....t payment of duty in the guise of trading activity by issuing trading invoices and splitting the value into different categories and adopting such other practices to show as if it was a trading activity. After due process of adjudication, adjudicating authority vide OIO No.C.Ex.01/98 dt. 24-06-1998 inter alia confirmed the following : (i) Duty demand of Rs. 53,20,821/- under Section 11A (1) of Central Excise Act, 1994 on IDS ; (ii) Penalties of Rs. 10,00,000/- and Rs. 50,000/- under relevant provisions, on IDS, and Shri R. Balakrishnan, General Manager of IDS. 4. The adjudicating authority while deciding the case had relied on statement of i. Shri G.V. Prasad, Director dated 02.02.1995 that they have undertaken manufacture and clearance of computer systems without taking Central Excise Registration, without informing the department and without payment of Central Excise duty. 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 ....
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....d to Hard Disk Drive it is submitted that the computer systems in those days i.e. approximately 25 years ago does not have hard Disk Drive (HDD) and functioned with only Floppy Disk Drive (FDD) but not HDD. The HDD is only an optional item which was introduced subsequently after advancement of technology. (v) The department is aware of the fat that the Appellants are engaged only in trading activity and not manufacture as the Appellant has surrendered the excise license on 24.08.1992 and the same has been acknowledged by the department. Hence, the entire demand is barred by limitation as the SCN is issued on 10.07.1995 for the period August, 1991 to December, 1994. (vi) That they are under the bonafide belief that they are engaged in trading activity which does not amount to manufacture and hence extended period of limitation cannot be invoked. The 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 Rs. 10,00,000/- for the appellant and Rs. 50,000/- on Shri G.V. Prasad,....
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....y; that out of the 559 pieces of computers purchased, they sold 542 computers and out of the 542 sold computers also, several computers were sold in the same from in they were purchased without putting them together with any peripherals and any software. To address this contention adjudicating authority has done invoice by invoice examination and has concluded that during the subject period 397 computer systems were supplied to customers in assembly form. Para 7 & Para-10 of the impugned order are worthy of reproduction here as under : "7. The first issue to be decided is whether the activity undertaken by IDS would amount to manufacture of computers or merely a trading activity. The claim of IDS is that the activity of supplying of bought out computer systems and merely adding peripherals and software does not constitute to '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 Rs. 2,33,76,182/- were supplied to the customers af....
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.....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. 10.6 It is pertinent to note that none of the customers or officials of the appellant from whose statements have been recorded have subsequently retracted their say. 10.7 In the hearing, the main emphasis of the ld. Advocate was to seek to convince us that the computers sold by them did not require a hard disc drive and that only a floppy disc drive is required for the purpose. While this Tribunal cannot claim to be exports in the field of computer hardware, it is but layman knowledge that every computer system, including the earlier ones, would definitely require a Hard Disc Drive for using magnetic storage to store 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 es....
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....ng payment of central excise duty only on the former, was the subject matter, the Tribunal has upheld the duty, liability demanded on computer systems manufactured by the appellant therein. 13. We are therefore fully convinced that 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 Rs. 38,21,398/- on Integrated Data Systems. 14.1 Coming to the imposition of penalties, appellants have inter alia submitted that in the first round of adjudication, in OIO No.01/98 dt. 24.06.98 penalty of Rs. 10 lakhs had been imposed of IDS and Rs. 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 Rs. 38,00,000/- and Rs. 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....