Full Judgment
2. The brief facts of the case are that the appellants started manufacture of Microprocessor Trainers and Prom Programmers in 1981.
Microprocessor Trainer is an educational training equipment which helps to educate students as to the various uses which Microprocessor Chip 8085 can be put to. The other product viz. Prom Programmer is used to feed instructions on the chips to be used. The appellants were under the bona fide impression that the two items fell for classification under T.I. 68 and since they were a Small Scale Manufacturer and as their clearances did not exceed Rs. 20 lakhs, they were totally exempt by virtue of Notification No. 105/80, dated 19-6-1980 and, therefore, they neither applied for a Central Excise Licence nor followed any of the Excise procedures. In October, 1986, the premises of the appellants were raided by the officers of the Central Excise Department on the basis of intelligence collected that the appellants were evading payment of duty on the above items which the Department held classifiable under T.I. 33DD as computers. The statement of the Partner of the appellant firm was recorded and subseqtiently a show cause notice was issued on 30th October, 1986, charging the appellants with contravention of the provisions of Rule 174 for manufacture of excisable goods during 1st November, 1981 to 16th March, 1985, without having applied for or having obtained a licence, contravention of other relevant rules, suppression of facts with intention to evade payment of duty and proposing recovery of duty as above mentioned in respect of the two disputed products cleared between November, 1981 and March, 1985 and further proposing imposition of penalty.
3. The adjudicating authority held that the products in question possessed the essential characteristics of a computer viz. inputs, storage, control, processing and output; the product had input and output devices and CPU and storage device; hence/even though the products did not have the normal computer applications, they still would fall within the definition of computers. Accordingly, he confirmed the demand of duty; however, holding that the problem related to classification and there was no mala fide, he did not impose any penalty.
4. We have heard Shri V. Lakshmikumaran and Shri R. Nambirajan, learned Counsels and Shri M. Jayaraman, learned DR and carefully considered the rival submissions. The two issues that arise for consideration in the appeal are : (b) whether the microprocessor trainers and prom programmers are classifiable under T.I. 33DD or under T.I. 68.
Issue No. (a) The plea of the appellants is that they bona fide believed that their products were not computers which belief was based upon the classification of similar products manufactured by M/s. Applied Electronics Ltd. under T.I. 68 (page 68 of the paper back). They further relied upon the opinion dated 3-2-1987 of the Department of Electronics, Computer Development Division, stating that the microprocessor trainers used for training purposes and prom programmers are not considered as computers or peripheral items and hence do not attract duty under T.I. 33DD even during the period 1981-85 when computers and peripherals, all sorts, were excisable.
We see great force in this submission. We accept the contention that the appellants were under the bonafide belief that the two items in dispute were not computers classifiable under T.I. 33DD. We also note that in the case of Collector of Central Excise, Madras v. Allied Computers reported in 1987 (31) E.L.T. 421, the Tribunal has held that the computer like article used for training purposes, having essential components of a computer but not giving output is not a computer classifiable under T.I. 33DD, but classifiable under T.I. 68 of the Central Excise Tariff. In these circumstances, there is no gainsaying that there was genuine scope for doubt as to whether the disputed items could be considered to be computers.
Hence, intention on the part of the appellants to evade payment of duty, which is an essential ingredient for invoking the extended period of limitation in terms of the proviso to Section 11A of CESA, 1944 is not established. We, therefore, hold that the duty demand is barred by limitation and accordingly set aside the same.
6. In view of our finding that the demand is entirely barred by limitation we do not deem it necessary to record any finding on the issue of classification.
7. In the result, the impugned order is set aside and the appeal allowed only on the score of limitation.