Demand for Excise Duty on Sale of Computer System Confirmed Merely on Presumption without Examination: CESTAT sets aside Order Demanding Duty [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal(CESTAT) held that the demand for excise duty on the sale of computer systems confirmed merely on presumption without examination is not valid and set aside the order demanding duty.

Prompt Systems & Software and H B Electronics, the appellant challenged the confirmation of demand of Central Excise Duty.  It was noticed that the current demands relate to the demand of Central Excise Duty on the sale of computer systems.

The Appellants were engaged in the manufacture of Computer Systems, classifiable under Chapter 84 of the Schedule to the Central Excise Tariff Act, 1985. The Advocate on behalf of the Appellant submitted that they were manufacturing computer systems as well as trading activity of parts of computers.

He fairly submitted that on earlier occasions, the Commissioner (Appeals) allowed their appeal to the extent of re-sale of the parts would not be dutiable. Revenue filed an appeal before the Tribunal. The Tribunal passed an ex-parte order and remanded the matter to the Commissioner (Appeals) to decide afresh, after considering the case laws as mentioned in the appeal of the Revenue.

The Commissioner (Appeals) disposed of the appeal with a certain direction. The main contention is that the value of the trading goods also clubbed with the value of the computer system.

It was also submitted that the invoices represent only the sale of parts and not the computer system and therefore, the demand of duty on trading goods cannot be sustained. In our considered view, the Commissioner (Appeals) should have examined the documents of the trading goods.

It was evident that at the material time what was the practice in the trade? There is no examination whatsoever of the documents like invoices. Not even one invoice has been examined in detail. The impugned order merely repeats the allegations made in the show cause notice that too without giving any independent finding whatsoever.

The two-member bench comprising of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) set aside the impugned order which is based on presumptions. The onus of proving that the activity of manufacture had taken place was on the revenue and revenue has failed to fulfil the said obligation despite repeated opportunities being given.

To Read the full text of the Order CLICK HERE

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