Judgment
1. For reasons recorded below, we dispense with the requirement of pre-deposit of duty and penalty and proceed to dispose of the appeals themselves.2. In these cases which arise out of the order passed by the Commissioner of Central Excise. Delhi, a duty demand of Rs. 47,84,216/- has been confirmed on the first applicant company viz M/s. Crescent Computers and an equivalant amount of penalty has been imposed under Section 11AC of the Act and a penalty of Rs. 5 lakhs has been imposed under Rule 173Q of the Central Excise Rules, 1944 and a penalty of Rs. 2 lakhs has been imposed on the second applicant viz. Shri Rajiv Aggrawal who is the Director of the first appellant company. The duty has been demanded inter alia for the reasons that: (a) the applicant company had undervalued the computers by clearing them on payment of duty on a lower value for self to office and thereafter, sold them from the office to the customers at much higher prices. The demand under this heading is Rs. 9,48,236/-.
(b) a deemed of Rs. 18,24,561/- has been confirmed on computers claimed by the appellant company to be part of trading activity and representing infer alia supply of software and peripheral devices.
(c) a demand of Rs. 18,26,751/- has been confirmed on parts of computers alleged to have been manufactured by the appellant company, rejecting their defence that parts were cleared by them as trading activity.
(d) demand of Rs. 1,84,702/- has been confirmed by inclusion of warranty charges in the assessable value of the computers.
3. We have heard Shri V. Sridharan. learned Counsel who primarily contends that the impugned order has been passed in gross violation of principles of natural justice due to non-supply of documents relied upon by the department and other documents resumed by the, department from the appellants, and Shri K. Srivastava. learned DR who submits that the plea of non-supply of documents loses significance in view of the fact that the Adjudicating authority has decided the case on the basis of the allegations in the show cause notice. We find that, in order to substantiate their defence in respect of the charge of undervaluation of computers, the appellant company had to establish that the invoices raised from the office covered several items other than those manufactured in their factory and for this purpose, the appellants required to be supplied with copies of the orders placed on it by the customers and all the invoices raised from the Sales Office, which documents were resumed by the department and copies not made available prior to the passing of the impugned order. Further, in order to prove that what appellant company sold to the customers is exactly the same configuration to rebut the charge of upgradation of computers/configurated systems, the appellant company required the purchase invoice as sell as invoice resumed by the department but not made available to it. Copies of the invoice resumed be the department required for the purpose of identifying the items covered thereunder in relation to parts cleared by the appellants have also not been made available. Customers orders required for the defence regarding additional warranty have also not been made available. We find that the appellants had requested for these documents in their reply to the show cause notice as well as under cover of letters dated 21.1.97. 17.3.98.
31.3.98 and once again on 21.4.98. after the personal hearings heard on 18.3.98 and 20.4.98. We also find that the Adjudicating authority has held that addition of peripherals and software to basic computers manufactured by the appellant company after matching compatibility amount to manufacture. attracting levy of duty and therefore. It becomes all the more necessary for the appellant company to establish with reference to the documents such as invoices, etc. that what was bought out by them and added to the basic computers manufactured by them, did not result in a new commodity distinct from the basic computers and that therefore, no manufacture took place so as to attract duty liability.
4. We therefore, set aside the impugned order on the ground of contravention of the principles of natural justice and remand the case of M/s. Crescent Computers (E/A No. 2296/98-A) to the jurisdictional Commissioner of Central Excise for de novo adjudication after supply of copies of relied upon documents and after extending a reasonable opportunity to the appellants of being heard in person and adducing such evidence as deemed necessary for its defence.
5. So far as the second appellant is concerned, his contention that neither was there any proposal in the show cause notice to impose penalty upon him nor was the show cause notice served upon him, is acepted having regard to the fact that the show cause notice on record only shows M/s. Cresent Computers as the noticee and also noting that the department has not been able to controvert this submission.
Accordingly, we set aside the penalty imposed upon the second appellant and allow E/A No. 2326/98-A.