I am unable to login through terminal when the machine boots. Although I am presented a login prompt but after entering the username, second carriage return is being processed as the password and hence I am unable to login.

I don't have GUI (X-Windows). I am facing this problem on the terminal. Is it a hardware specific issue.

I'm not sure if I understand what exactly is your problem.
the keyboard?
try using Ctrl-J as carriage return.

That is because you normally enter a password before the second carriage return.

Type in you user name.
Press enter.
Type in your password.
Press enter.

See?

If, however, you mean that you enter your username, press enter once, but the password prompt appears and you are told your password is invalid (as if you had pressed enter twice) then you should try with a different keyboard.

Are you saying that you use a <CR> char in your username??? Surely not..
The usual system is

login: username<CR>
password: yourpasswd<CR>

but as you type the password, it's not echoed to the screen and the cursor won't move. Nonetheless, it's still entered.
Apologies if you know this.

Thats the exact problem.

I changed the keyboard but still facing the same problem.

Is it like that with all users?

Also, if you can, try booting with a live CD (just as a test).
That way, if the problem still exists, it is more likely to be a hardware problem.

Hey I am being able to login using "Ctrl + J". It is certainly not an keyboard issue coz I have changed the keyboard. Whats the issue then?

It can be many things.

if you're using a ps2 keyboard try using a usb keyboard (and in the opposite direction)

the keyboard is not the only thing between your fingers and the console. there is the motherboard, the device driver, and who knows what else... (kernel developers)
so it can still be a hardware problem

What kind of keyboard are you using? Is it a standard 104 keys english "qwerty" keyboard?
also, try typing "sh -c read" and pressing on <CR> after you login. if console gets a double carriage return, the read command will not get input. then you will know that the problem is not specific to the login stage.

I installed new Operating System and even tried a Live CD but still facing the same problem. I am always required to use "Ctrl + J"

looks like a hardware issue to me

Bad hardware - perhaps in the socket the kbd is connected to, perhaps on the motherboard. If a USB kbd, use a different socket. Change to ps/2 ... if ps/2 use usb.

Have you tested it after you logged in? Do you get double presses from <enter> in all applications.

All indications is that your computer is starting to break. It happens.

Tried USB as well as PS2 but the problem continues........

Yeah, I am getting double presses for all the applications.

Well this is a brand new PC that was delivered to me this morning for testing before it could be used in the labs.

Return it to the supplier - it's broken.