- (1.) WE have heard Sri M.P. Devnath assisted by Sri Nishant Mishra for the appellants. Sri S.P. Kesarwani, appears for the respondents -department. On 24 -2 -2011, the appeal was entertained on the following substantial questions of law : - (i) Whether the processes undertaken by the assessee amount to "manufacture" or not? (ii) Whether the processes undertaken by the assessee at Rampur warehouse being similar to the processes undertaken by the assessee at Hyderabad warehouse and the evidence being same, the Tribunal bench at Delhi could distinguish the earlier decision of Tribunal bench at Bangalore, to arrive at a different conclusion? (iii) Whether in the circumstances of the case, the extended five years period of limitation could be invoked by the Excise Department or not? (iv) Whether in the circumstances of the case, any penalty could be imposed?
(2.) IT is submitted that the appellant was served with a show cause notice by the assessing authority both at Hyderabad and Rampur, where the Company have warehouses, in respect of demand of excise duty, on the alleged manufacture of photocopier through the Company during April 2002 to November 2005, and equal penalty imposed under Section 11 of the Central Excise Act 1944. The Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Bangalore (in short CESTAT, Bangalore), vacated the demand and penalty on the Company, and the personal penalties imposed on the executives of the Company on the findings recorded in its order dated 9 -11 -2009 - : 2010 (252) E.L.T. 273 (Tri. -Bang.), as follows : - "We observe that XIL imported Xerox brand photocopiers of different models in CKD form including printers. These consignments on import were received in the warehouse of the Appellants at Hyderabad and Rampur. The major component called "work centre" and other parts (modules) were received in separate packing. In the power point presentation made in the Court by the Appellant, it was shown that these modules to be fitted to the work centre were dispatched from the warehouse at Hyderabad in original packing. The Appellants undertook the process of kitting in the warehouse as follows. The imported components are grouped in sets of complete machines, with or without printers, depending on the Orders received. Each machine is assigned a unique identification number. The complete machines so configured and grouped are sold, or dispatched to various depots for sale to customers. Even though the learned Special Counsel for the Revenue submitted that certain components like HCF and DADF were fitted on work centre, he admitted that there was no evidence in support of this claim. The learned Counsel for the Assessee explained the statement relied on by the learned Special Counsel that the same was 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 packing. We find that elaborate arguments advanced to establish that a process of manufacture had been undertaken by the Appellants before photocopier machines were cleared from the warehouse are entirely without any basis in facts. The Commissioner found that the Appellants undertook assembly without making any verification whatsoever. We do not find any deposition by the executives stating that the modules were assembled in the warehouse. The legal arguments advanced by the Revenue are based on Note 6 of Chapter XVI of the CET. This note reads as follows : 6. In respect of goods covered by this Section, conversion of an Article which is incomplete or unfinished but having the essential character of the complete or finished Article (Including "blank," that is an Article, not ready for direct use, having the approximate shape or outline of the finished Article or part, and which can only be used, other than in exceptional cases, for completion into a finished Article or a part), into complete or finished Article shall amount to "manufacture". 5. We find that the Appellants did not carry but any activity as envisaged in this note. The components received in sets were cleared as such; no conversion of an incomplete machine into complete machine took place in the warehouse of the Appellants. Assembly of components into photocopiers took place at the premises of the respective buyers. In view of this factual position the arguments advanced by the Revenue are totally irrelevant. 6. The learned Spl. Counsel argued that the components imported were assembled in the warehouse by kitting and this operation using the computer system 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. 7. The learned 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 Corporation Ltd. v. CCE, Meerut -II, : 2001 (130) E.L.T. 219 (Tri. -Del.) (ii) Tanzeem Screenarts v. CCE, Mumbai -I, 2006 (196) E.L.T. 209 (Tri. -Mumbai) and (iii) Commissioner of C. Ex., Coimbatore v. VXL Systems, 2009 (235) E.L.T. 109 (Tri. -Chennai). In these cases there were components manufactured and/or components assembled by the Assessee concerned to make complete machine. In the case on hand, the parts found to have been fitted to the main module were not dealt with except for removing them in sets in their original packing. By grouping the parts of a complete copier with printer or without printer, assigning the parts in each set a unique number using a computer, we hold, does not amount to manufacture. There is no conversion of an incomplete machine into a complete machine in the warehouse to attract the Section Note 6 of Section XVI. The learned Special Counsel could not show to us assembling of any two parts taking place before the impugned clearances from the warehouse as found by the Commissioner, If the plug pin is changed to suit the electrical fittings in vogue in the country, it is idle to argue that it is a material process of manufacture. Nothing new emerges from this process and every process is not manufacture as held by the Apex Court in its Judgment in the Union of India v. Delhi Cloth Mills, 1977 (1) E.L.T. 199 (S.C.) case. Already complete photocopiers are in existence in CKD condition. There is no manufacture and demand of duty on such a finding is liable to be vacated. 8. As the demand and penalty on XIL are vacated, the personal penalties imposed on the executives of XIL on a finding of the XIL having manufactured and cleared excisable goods without payment of Excise Duty and the Appellants having knowingly dealt with such offending goods are not sustainable. In the circumstances, the impugned Order is set aside and all the three appeals allowed."
(3.) BY the order dated 30 -11 -2010 [ : 2011 (270) E.L.T. 395 (Tri. -Del.), passed by the Customs, Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi under challenge in this Appeal for the same period on identical notice and issue, the Appellate Tribunal did not find any infirmity in the adjudication order of the Commissioner.;