Liquidated damages and assessable value: contractual delay damages were held not deductible from central excise valuation.

Liquidated damages payable for delayed delivery were held not deductible from the assessable value under Section 4(1)(a) of the Central Excise Act, 1944. The assessable value is the normal wholesale price at the time and place of removal, and where that normal price is undisputed, a contractual reduction for breach of delivery terms is only an inter se adjustment between the parties. Such damages do not constitute an allowable deduction or affect the normal price of the goods. The Revenue's view was therefore upheld.

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Issues: Whether liquidated damages payable by the assessee for delayed delivery of goods can be deducted while arriving at the assessable value under Section 4(1)(a) of the Central Excise Act, 1944.

Analysis: The assessable value under Section 4(1)(a) is the normal price at which the goods are ordinarily sold in wholesale trade at the time and place of removal. Where there is no dispute about the normal price, a reduction made towards liquidated damages for breach of a contractual delivery condition is only an adjustment between the parties and not an expenditure forming part of the permissible deductions. Such damages arise from non-compliance with the agreement and do not alter the normal price of the goods.

Conclusion: Liquidated damages were not deductible for determining the assessable value, and the appeal succeeded in favour of the Revenue.

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