ORDER
K. Sankararaman, Member (T)
1. Appellant, engaged in the manufacture of computers, had cleared during the period 14-3-1983 to 4-2-1985 computers with peripherals paying Central Excise duty on only the Central Processing Units (CPU) only without including the cost of peripherals and software in the assessable value. They were issuing for each computer supplied three separate invoices for the CPUs, peripherals and the software. After scrutiny of the records, show cause notice dated 3-7-1987 was issued to the appellant alleging short payment of duty of Rs. 20,67,146.41. After the appellant replied-to the notice resisting the allegation and appeared for per- sonal hearing, Collector of Central Excise, Aurangabad passed Order-in-Original No. Collr/28/88, dated 17-10-1988 demanding duty of the amount proposed in the show cause notice and imposing penalty of Rs. 7,50,000/-. The appeal challenges the said order.
2. On behalf of the appellant, learned Counsel Shri Rohan Shah made submissions assailing the Collector’s finding on merits as well as on the ground of limitation. On merits, he contended that the peripherals in question, the value of which has been included in the assessable value of the computers by the Collector for computing the differential duty, are accessories which are supplied only on the specific orders of the customers and not supplied in all cases. He relied upon the Supreme Court decision in Shriram Bearings Ltd. v. C.C.E., Patna, 1997 (91) E.L.T. 255. These accessories, he added, are not manufactured by the appellant but are imported. Sometimes they buy locally manufactured items. These are duty paid, countervailing duty, or the Central Excise duty, as the case may be. The addition of cost of software supplied and the installation and commissioning charges is wrong. He relied upon the decisions in the following cases :-
(1) 1997 (89) E.L.T. 3 (S.C.) – PSI Data Systems
(2) 1997 (91) E.L.T. 91 (Tribunal) – Kishore Pumps
(3) 1987 (33) E.L.T. 787 (Tribunal) – Sunray Computers
On limitation, learned Counsel contended that there was no suppression involved as their practice of issuing three invoices was brought to the notice of the department by appellant’s letter dated 10-3-1983. In the circumstances, the show cause notice dated 3-7-1987 issued more than six months after the relevant period ending 4-2-1985 was time barred as the extended period under the proviso to Section 11A(1) of Central Excise Act was not applicable.
3. These submissions were resisted by Shri M. Ali, Departmental Representative who stated that the appellant had not reported to the department their practice of issuing three sets of invoices while paying duty only on the CPU portion of the computer. The letter dated 10-3-1983 claimed to have been filed by the appellant intimating their invoicing procedure is not on the record of the department as brought out in the Collector’s order. On merits, Shri Ali contended that the peripherals in question are integral parts of the computer. The keyboard and monitor are plugged into the CPU to form the computer. The Disk drives are fitted in the CPU. Tariff Item 33DD specifically included peripheral devices also. Collector has also referred to Notification 148/76-C.E., dated 1-5-1976 which provided for the inclusion of value of peripheral devices in the value of computers for assessment. He referred to the Tribunal decisions in Decibel Electronics Pvt. Ltd. v. Collector of Central Excise reported in 1996 (88) E.L.T. 181 and in Nichrome Metal Works v. Collector of Central Excise, Pune, 1996 (88) E.L.T. 448 and submitted that the value of those bought out peripherals which are integral parts of computers was includible in the assessable value of the computers. He supported the Collector’s order and pleaded for the dismissal of the appeal.
4. We have considered the submissions and perused the record. It is the plea of the appellant that the peripherals in question are accessories of computers to enhance their performance and hence the value of such peripheral devices is not includible in the value of the computers as also the amounts charged for software and consultancy. Reliance has been placed on the Supreme Court judgment in PSI Data Systems, 1997 (89) E.L.T. 3 for exclusion of the value of software. These contentions on merits apart, it has been pleaded that the practice of issuing three separate invoices for CPU of the computer, peripherals and for software was intimated to the department vide the letter of 10-3-1983. A photo copy of the said letter showing its receipt by the Inspector of Central Excise, Solapur has been filed in the appeal papers. This letter has been referred to in the reply to the show cause notice hut the Collector has rejected the plea stating that the letter was not on record and that the letter was not referred to by the Managing Director, Shri K.R. Sheth when he gave his statement. The appellant had sought cross-examination of the Inspector who had received the letter in question and who was reportedly posted in Solapur itself. There is no discussion about this in the adjudication order. We are of the view that in the circumstances the letter must be accepted as genuine and the plea of limitation has force as appellant had brought it to the notice of the department the practice of issuing separate invoices for the CPU, peripherals and software and also intimated the fact that the peripherals are imported and duty paid and had claimed that no excise duty was attracted as they had not manufactured the same. Their claim may or may not have been correct but it is clear which they had brought to the notice of the Excise department; even in early 1983, that it was their belief. It was for the department to have acted on such intimation and taken steps to require the appellant to comply with the requirements if the claim made was found to be not admissible.
5. In the impugned order the Collector has referred to the Tariff Entry 33DD which read as follows at the material time :-
“Computers (including Central Processing Units and Peripheral Devices) All Sorts”
He has observed that on reading the Tariff Entry, it would be abundantly clear that computer shall include not only the Central Processing Unit but also the peripherals and that this view found support from Notification 148/76-C.E., dated 1-5-1976. The Notification read as under :-
“Computers falling under Item No. 33DD cleared with indigenous or imported peripheral devices are exempt from so much of duty of excise leviable thereon as is equivalent to the amount of the duty of excise or as the case may be, the additional duty under Section 2A of the Indian Tariff Act, 1934 (32 of 1934) already paid on such peripheral devices, provided the value of the same computers includes also the value of the peripheral device.”
The Collector held that from this it would be clear that computer cleared with peripherals are exempt from the excise duty or countervailing duty already paid on such peripheral devices. Under Notification 109/80-C.E., dated 19-6-1980 the procedure prescribed under Rule 56A was prescribed for availing of such exemption. It was open to the party to avail the benefit of exemption which they failed to do. The Collector has noted that a good deal of buyers had purchased the peripherals along with the computers. This would indicate that the peripherals were not supplied in all the cases. It has been contended on behalf of the appellant that peripherals were supplied only against specific orders for them by their customers and that in fact they had not supplied the peripherals to some of the buyers of CPUs.
5. As regards the Collector’s finding based on the Tariff Entry 33DD we find that the language of the said Entry viz. computers (including Central Processing Units and Peripheral Devices), would imply that the said Entry covered Central Processing Units and Peripheral Devices and not that peripheral devices as component parts of computers. The inclusive definition of the item computer referring for instance to Central Processing Units would, therefore, mean that CPUs would merit classification as computers and it would not be open to a manufacturer of CPUs to contend that what he has manufactured is only CPU and not a computer. Exemption Notification 148/86 has also been interpreted by the Collector to mean that computer would include peripheral devices also. The Notification provided for exemption from duty for computers to the extent of the excise duty or, as the case may be, of additional duty of Customs (countervailing duty) already paid on peripheral devices subject to the condition that the value of computers included the value of such peripheral devices. Such inclusion of the value of peripherals in the value of computers is a condition for grant of the benefit of exemption to the extent of the excise duty or countervailing duty paid on the peripheral devices. In this case the benefit of such exemption has not been claimed by the appellant. The proviso in the notification about the value of computers including the value of peripheral devices would appear to indicate that the only consequence of non-inclusion of the value of peripheral devices in the value of computers would be the nonavailability of the exemption to the extent of excise duty or countervailing duty, as the case may be, already paid on such peripheral devices. This is as it should be, as there cannot be such exemption where the value of computers does not include the value of peripherals. The consequence of non-inclusion of the cost of peripherals cannot be demand of duty or. the computers by including in its value [the value] of peripherals. If, however, such inclusion is decided, the benefit of exemption under the said Notification would be available. Admittedly, appellant had not claimed the benefit of the exemption at the time of clearance of the computers and had also not followed the procedure prescribed under Chapter X of Central Excise Rules. These were not done obviously because the computers were cleared by paying duty on their value which did not include the value of peripheral devices. When duty has been demanded by including the value of peripheral devices in the value of computers, it has to take into account the impact of the exemption Notification. This may substantially reduce the duty demand, such demand being restricted to the duty leviable on the difference between the price charged by the appellant to the buyers of such peripheral devices (supplied with the computers) and the value of such peripheral devices on which excise duty or, as the case may be, countervailing duty had already been paid. This will be so as duty on such difference of value will be payable treating such peripheral devices as parts of computers themselves.
6. In the circumstances of the case and in view of the appellant having brought the fact of non inclusion of the value of peripheral devices to the notice of the department, the appeal succeeds on the ground of limitation. We accordingly set aside the order and allow the appeal.