2018 (11) TMI 1142

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....nt of their goods for the period 1.7.2006 onwards, as their contract had a price variation clause. The Assistant Commissioner finalised the provisional assessment and passed an order dated 04.10.2007 against which they have appealed to the first appellate authority who remanded the matter for denovo adjudication. Denovo order in Order-in-Original No. 02/2008 was passed by the lower authority disallowing reduction in assessable on "Guaranteed Powder Factor" holding that is not a price variation clause but is in the nature of a penalty and hence not deductible from the assessable value. Against this order, respondent appealed to the first appellate authority. Through the impugned order, the first appellate authority allowed the appeal holding....

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....436 (Tribunal) in which it was held that in case of a contract price, the agreement containing clause for payment of liquidated damages - damages or compensation cannot be regarded as price or part of price and the price remains constant at the agreed level. (e) Gulf Oil Corporation Limited vs. CCE, Ranchi [2010(253)ELT 630 (Tri.-Kolkata)] in which it was held that appellant cannot claim refund on the grounds that penalty has been imposed on them because the explosives did not meet the benchmark. 2. Ld. DR takes us through the relevant portion of the contract which reads as follows: "GUARANTEED POWDER FACTOR: (1) The guaranteed powder factor (GPF) for each project is for removal of over burden in shovel benches and on cut to cut basis f....

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....d accrue to the supplier in case if the powder factor achieved is more than the guaranteed powder factor. (4) They should supply uninterruptedly the explosives required for each project. 3. He would therefore argue that the guaranteed powder factor is only a guarantee of achieving target over a period of one year and if the performance is higher in terms of the agreement, they are not entitled to extra payment but they are liable to the penalty if they fail to meet the benchmarks. 4. Ld. Consultantl for the appellant would argue that the guaranteed powder factor is in the nature of a price variation clause and therefore they are entitled to the benefit of price variation as a result of failure to meet the benchmark. He would draw our att....

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....y quarter and if there is shortfall, they will make proportionate deduction in payment. There is another clause in the agreement towards price variation depending upon various factors including the guarantee for blast failure, which reads as follows. "To guarantee for blast failure for all accessories when used with their explosive. In case of blast failures, if any, due to defective accessories, the firm shall reimburse the cost of explosive involved along with the drilling cost." 6. The price variation table mentions various other factors and at Sl.No. Q of Table 'C' mentions that other terms and conditions shall be as per Annexure-III. Annexure-III inter-alia includes guaranteed powder factor. Thus, it is evident that the respondent is....