M/S. Wipro Infotech Ltd. Vs. Central Excise, Bangalore - Court Judgment

Excerpt:
1. the assistant collector after considering the facts of the case, brought on record and the submissions advanced by the assessee while replying to the show cause notice came to a finding that switch mode power supply, shortly known as smps were used in the computer to convert ac current to dc current, as most of the computers were designed to work only on dc current. therefore he found merit in the assessee's argument that such smps are used exclusively to convert 220 volts ac current into 5 volts dc current and chapter note 5(b) implicitely cover units within the scope of chapter sub-heading 84.71 and thereafter he gave a detailed finding subject to what chapter note 5(b) reads as; he noted that this reading implicitely conveys the meaning that the power supply unit, designed for specific use as part of the system was classifiable correctly under heading 8471 of ceta.he also relied on the orders of his predecessor in the appellants own case that smps used in computer were classifiable under heading 84.71.2. commissioner did not find this classification of the assistant commissioner to be legal and proper and filed an appeal to commissioner (appeals) urging the classification under sub-heading 85.04 on the following grounds: "the asst. collector, mysore failed to appreciate that for an article to be classified under 84.71 it should satisfy the following conditions: i) it should be capable of maintaining continuous power supply to computers. ii) it should be controlled by the computer for which it is used and receives signals. smps do not conform to the above conditions as they are not capable of maintaining continuous power supply to the computers when the main s.c. power is disconnected and they are not depending on computers to perform their functions. hence they are not classifiable under 84.71. further asst. collector, mysore failed to note that the smps unit not only supplies power from the electrical mains to the computer but also converts the output to unable d.c. voltage which is its primary function and thus functions as a static converter, clearly falling under sub heading 85.04 of central excise tariff". the commissioner (appeals) after considering the appellants replies and the material came to a conclusion that the smps do not conform to the conditions as taken in the ground of appeal, namely, they are not capable of maintaining continuous power supply to the computers when the main source of power is disconnected and therefore they are not dependent on computers to perform their functions and hence not classifiable under 84.71 and he classified them under 8504.3. the appeal was heard today when learned counsel shri rajesh chander kumar, advocate for the appellants submitted- (a) they were trading in smps in as much as they were procuring it, after paying duty to the suppliers under 8471 and clearing it on debiting of the duty equivalent to under 8471, as per provisions of rule 57f(ii) as it existed then. he relied on the larger bench decision in the case of m/s. american auto service, (1996 (63) ecr 131) and to submit that inputs cleared as such for the home consumption, the duty will be leviable on the rate at which it was paid initially by the original manufacturer since they have paid duty under 8471, there was no case to demand duty at the rates under 8504 by initiating these proceedings. (b) alternatively he relied on chapter note 5(b) of chapter 84 to submit that the assistant collector has come to a positive finding that the smps in question were specifically designed to work only in computers and would be covered vide chapter note 5(b) and the grounds taken in appeal by the commissioner were not impugning this finding of the asst. collector. therefore these facts has found by the asst. collector have attained finality and on merits the classification under 8417 cannot be assailed. (c) he submits that earlier classification of the same product as approved by the asst. collector was not challenged under 84.71. in this view he submits that the present orders in appeal, which has travelled beyond the scope of the original notice is required to be allowed by setting aside the order of the learned commissioner (appeals).4. learned d. r. smt. radha arun submits that chapter note 5(b) prescribes that- "heading 84.71 does not cover machines incorporating or working in consumption with an automatic data processing machine and performing a specific function." she submits that the asst. collector's findings are only regarding a specific function and not specific designing as is being claimed by the learned advocate under chapter note 5(b). (a) the larger bench decision in the case of cce, coimbatore vs. american auto service (1996 (63) ecr 131 tribunal) would be the re-classification of the smps under any other heading than 84.71, when the inputs are being removed as inputs, classified under 84.71, when it is admittedly the position that the supplyer had classified it under 84.71 and modvat credit was obtained of the duty paid under 84.71. (b) we find that the grounds taken by the commissioner and thereafter the finding arrived at by the learned commissioner (appeals) do not find any flaw or fault in the findings of the asst. collector that the item is used exclusively and is meant to convert ac current to dc current used in computers, and therefore it should be covered under 8471 as per chapter note 5(b). we also find that the commissioner, who has taken the grounds in appeal, is the same commissioner who has decided the issue while sitting as commissioner (appeals) thereafter, without considering this crucial finding of the fact by the original authority. in this view we find that once the original authority has found that the item is specifically designed for use and exclusively used in computers, therefore we find merit in the finding that it would be classifiable under 84.71 by applying chapter note 5(b).6. in view of our finding we get aside the order of the commissioner (appeals) and allow this appeal.

Judgment:
1. The Assistant Collector after considering the facts of the case, brought on record and the submissions advanced by the assessee while replying to the Show Cause Notice came to a finding that Switch Mode Power Supply, shortly known as SMPS were used in the computer to convert AC current to DC current, as most of the computers were designed to work only on DC current. Therefore he found merit in the assessee's argument that such SMPS are used exclusively to convert 220 Volts AC current into 5 Volts DC current and Chapter Note 5(b) implicitely cover units within the scope of chapter sub-heading 84.71 and thereafter he gave a detailed finding subject to what chapter note 5(b) reads as; he noted that this reading implicitely conveys the meaning that the power supply unit, designed for specific use as part of the system was classifiable correctly under heading 8471 of CETA.He also relied on the orders of his predecessor in the appellants own case that SMPS used in computer were classifiable under heading 84.71.

2. Commissioner did not find this classification of the Assistant Commissioner to be legal and proper and filed an appeal to Commissioner (Appeals) urging the classification under Sub-heading 85.04 on the following grounds: "The Asst. Collector, Mysore failed to appreciate that for an article to be classified under 84.71 it should satisfy the following conditions: i) It should be capable of maintaining continuous power supply to computers.

ii) It should be controlled by the Computer for which it is used and receives signals.

SMPS do not conform to the above conditions as they are not capable of maintaining continuous power supply to the computers when the main S.C. power is disconnected and they are not depending on computers to perform their functions. Hence they are not classifiable under 84.71.

Further Asst. Collector, Mysore failed to note that the SMPS unit not only supplies power from the Electrical mains to the Computer but also converts the output to unable D.C. voltage which is its primary function and thus functions as a static converter, clearly falling under sub heading 85.04 of Central Excise Tariff".

The Commissioner (Appeals) after considering the appellants replies and the material came to a conclusion that the SMPS do not conform to the conditions as taken in the ground of appeal, namely, they are not capable of maintaining continuous power supply to the computers when the main source of power is disconnected and therefore they are not dependent on computers to perform their functions and hence not classifiable under 84.71 and he classified them under 8504.

3. The appeal was heard today when learned Counsel Shri Rajesh Chander Kumar, Advocate for the appellants submitted- (a) they were trading in SMPS in as much as they were procuring it, after paying duty to the suppliers under 8471 and clearing it on debiting of the duty equivalent to under 8471, as per provisions of Rule 57F(ii) as it existed then. He relied on the Larger Bench decision in the case of M/s. American Auto Service, (1996 (63) ECR 131) and to submit that inputs cleared as such for the home consumption, the duty will be leviable on the rate at which it was paid initially by the original manufacturer since they have paid duty under 8471, there was no case to demand duty at the rates under 8504 by initiating these proceedings.

(b) Alternatively he relied on Chapter Note 5(b) of Chapter 84 to submit that the Assistant Collector has come to a positive finding that the SMPS in question were specifically designed to work only in computers and would be covered vide Chapter Note 5(b) and the grounds taken in appeal by the Commissioner were not impugning this finding of the Asst. Collector. Therefore these facts has found by the Asst. Collector have attained finality and on merits the classification under 8417 cannot be assailed.

(c) He submits that earlier classification of the same product as approved by the Asst. Collector was not challenged under 84.71.

In this view he submits that the present orders in appeal, which has travelled beyond the scope of the original notice is required to be allowed by setting aside the order of the learned Commissioner (Appeals).

4. Learned D. R. Smt. Radha Arun submits that Chapter Note 5(b) prescribes that- "Heading 84.71 does not cover machines incorporating or working in consumption with an automatic data processing machine and performing a specific function." She submits that the Asst. Collector's findings are only regarding a specific function and not specific designing as is being claimed by the learned Advocate under Chapter Note 5(b).

(a) The Larger Bench decision in the case of CCE, Coimbatore Vs.

American Auto Service (1996 (63) ECR 131 Tribunal) would be the re-classification of the SMPS under any other heading than 84.71, when the inputs are being removed as inputs, classified under 84.71, when it is admittedly the position that the supplyer had classified it under 84.71 and Modvat credit was obtained of the duty paid under 84.71.

(b) We find that the grounds taken by the Commissioner and thereafter the finding arrived at by the learned Commissioner (Appeals) do not find any flaw or fault in the findings of the Asst.

Collector that the item is used exclusively and is meant to convert AC current to DC Current used in computers, and therefore it should be covered under 8471 as per chapter note 5(b). We also find that the Commissioner, who has taken the grounds in Appeal, is the same Commissioner who has decided the issue while sitting as Commissioner (Appeals) thereafter, without considering this crucial finding of the fact by the original authority. In this view we find that once the original authority has found that the item is specifically designed for use and exclusively used in computers, therefore we find merit in the finding that it would be classifiable under 84.71 by applying Chapter Note 5(b).

6. In view of our finding we get aside the order of the Commissioner (Appeals) and allow this appeal.