Commnr. of Cent. Excise, Mumbai v. M/S. C.M.S. Computers P. Ltd., (SC) BS195865
SUPREME COURT OF INDIA

Before:-S.N. Variava, Dr. AR. Lakshmanan and S.H. Kapadia, JJ.

Civil Appeal No.5583 of 1999. D/d. 2.2.2005.

Commnr. of Cent. Excise, Mumbai - Appellants

Versus

M/S. C.M.S. Computers P. Ltd. - Respondents

A. Central Excise Act, 1944 Sections 2(d) and 4 Central Excise Tariff Act, 1985, Chapter 84, Chapter note 5 - Respondents manufactured mini computer processing system, but, did not manufacture monitors and printers - They use to buy monitors and printers from the market and supply to customers if customers required them - Such monitors and printers were duty paid items - Held - Monitor or printer is not an essential part of the computer and is a peripheral item which may be required along with a computer - It cannot be accepted that by virtue of Chapter Note 5 to Chapter 84 a monitor or printer becomes an essential part of a computer - Merely because the tariff entry may also include a monitor or printer would not lead to the conclusion that monitor or printer is an essential part of a computer - Thus they cannot be included in the value of the computer - Moreover monitor or printer would be excisable in the hands of their manufacturer.

[Para 5]

B. Central Excise Act, 1944, Section 5A - Central Excise Rules, 1944, Rule 8(1) - Notification No. 175/86-CE dated 1.3.1986 - Cases where aggregate value of clearances of all excisable goods exceeded the limit specified in the notification, were not entitled to the benefit of the notification - Mini computer processing system comprising CPUs and keyboard manufactured and cleared by assessee - In certain cases assessee as per the demands of the customer supplied monitors/printers purchased from a market - Whether limit specified in the notification was exceeded - Held - For determination of such a question only the value of goods manufactured and cleared by the assessee had to be taken into account and not the value of traded items like the monitor and the printer.

[Para 6]

C. Central Excise Act, 1944, Section 11A(1) proviso - Central Excise Rules, 1944, Rule 173-C - Extended limitation period - Applicability of - Mini computer processing systems comprising CPUs and keyboard manufactured by assessee - In certain cases assessee supplied printers/monitors to its customers as per their demand after purchasing them from the market - Department approved the classification list pursuant to filing of the said list by the assessee without including monitors and printers - Held - Under such circumstances Department had knowledge of all the facts - Thus extended limitation period was not available.

[Paras 3 and 7]

ORDER

S.N. Variava, J. - This Appeal is against the Judgment of the Tribunal dated 24th November, 1998.

2. The Respondents manufactured mini computer processing system of the following models:-

3. Prior to March 1987 computers were totally exempt from payment of duty. Therefore, the Respondents were clearing the computers without paying the duty. With effect from 1st March, 1987, computers became a dutiable item. The Respondents, therefore, filed a classification list which was approved. In this classification list they did not include monitors and printers. The Respondents also claimed benefit of Notification No.175/86-C.E. dated 1st March, 1986. The relevant portion of the Notification reads as follows:-

4. Show cause notices were issued to the Respondents claiming that monitors and printers were part of the computers. It was claimed that the value of monitors and printers was required to be included in the value of the computers. It was claimed that if these were included then Respondents would not be entitled to the benefit of the Notification inasmuch as the turnover of the Respondents would then be beyond the limit specified in the Notification. The demand against them was confirmed by the Collector. However, the Tribunal has by the impugned Judgment set aside the demand by holding that the demand was beyond time as the extended period under Section 11(A) was not available.

Before us very fairly it was not disputed that the Respondents do not manufacture monitors and printers. It is fairly stated that they buy these from the market and supply to customers if customers require them. It was also fairly not disputed that monitors and printers were supplied in approximately 30% of the cases only. It was also not disputed that the monitors and printers supplied by the Respondents were duty paid items which had been bought from the market.

5. It appears to us that a monitor or a printer is not an essential part of the computer. It is a peripheral item which may be required along with a computer. We are unable to accept the submission that by virtue of Chapter Note 5 to Chapter 84 a monitor or printer becomes an essential part of a computer. By virtue of this Chapter Note a monitor and/or a printer may also be classifiable under the same tariff heading. However, merely because the tariff entry may also include a monitor or printer would not lead to the conclusion that a monitor or printer is an essential part of a computer. All that this Chapter Note indicates is that not only the computer but a monitor and a printer are also excisable products. But the monitor and/or printer will be excisable in the hands of their manufacturer. 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.

6. The other question which arises is whether the Respondents are entitled to the benefit of Notification No.175/86-C.E. dated 1st March, 1986. It is submitted that the Respondents would only be entitled to the benefit of this Notification if the turnover did not exceed Rs. 150 lakhs in the preceding year. It is submitted that if the cost of the monitor and printer is taken into account, then the total turnover would exceed Rs. 150 lakhs. The arguments of the Revenue may have been acceptable if the concerned Notification provided that the turnover should not exceed Rs. 150 lakhs. However, as seen, the Notification is granting an exemption provided that the aggregate value of clearances of all excisable goods does not exceed Rs. 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 key board. Therefore, for the purposes of this Notification the value of traded items like monitors and printers was not to be included.

7. Even otherwise, we find that the Tribunal was right in holding that the demand was barred inasmuch as the classification list had been approved. All facts were therefore within the knowledge of the Department. The extended period of limitation was not available to it.

8. Under these circumstances, we see no reason to interfere.

9. The Appeal stands dismissed. There will be no order as to costs.

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