Liquidated damages under cancellation clauses are not assessable value when no nexus with later supply price is shown.

Liquidated damages paid by a buyer for cancellation and non-placement of purchase orders were treated as contractual compensation, not additional consideration for pumps supplied under a later contract. Because the earlier orders had been placed and supplies made, and no nexus was shown between the damages and the price of the later clearances, the damages were not includible in assessable value. As the valuation demand failed on merits, the connected duty demand and penalty also did not survive.

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Issues: Whether liquidated damages received from the buyer on cancellation of part of the purchase orders were includible in the assessable value of the pumps cleared under the subsequent contract, and whether the consequential duty demand and penalty were sustainable.

Analysis: The compensation was paid under the contractual arrangements for cancellation and non-placement of orders, and the record showed that earlier orders had in fact been placed and supplies made. The price of the eight pumps under the later contract had separately escalated substantially, and no material was brought to establish that the liquidated damages had any nexus with the price of the goods cleared under that contract. The compensation therefore represented damages under the agreement and not additional consideration for the pumps. Once the demand failed on merits, the question of penalty did not survive.

Conclusion: Liquidated damages were not includible in the assessable value, and the duty demand and penalty were not sustainable.

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