TaxTMI 
TaxTMI 
2021 (10) TMI 638
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....f the cancellation of the contract for supply of auto parts used in the manufacture of vehicles. Further, though penalty under section 11AC (1)(c) of the Central Excise Act, 1944 [the Excise Act] was confirmed, but it was not imposed under rule 26(2) of the Central Excise Rules, 2002 [the Excise Rules]. The Commissioner (Appeals) also observed that the demand had not been correctly calculated as the amount should have been treated as cum-duty price in terms of section 4(1) of the Excise Act and, accordingly, the matter was remitted to the Assistant/Deputy Commissioner to quantify the amount of duty recoverable from the appellant with a further direction that the appellant could produce the relevant records for this purpose. The appeal was, therefore, partly allowed by the Commissioner (Appeals). 2. The appellant claims that it is engaged in the manufacture of auto parts falling under Chapter 87 of the First Schedule to the Central Excise Tariff Act, 1985 [the Tariff Act ]. It availed and utilized CENVAT credit on inputs, capital goods and input services for discharging its output duty liability, in terms of the provisions of the CENVAT Credit Rules, 2004. [the Credit Rules ] Such ....
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....before the Commissioner (Appeals) who, by order dated 26.10.2018, partially allowed the appeal by confirming the proposed demand but extended the benefit of cum-duty price and also directed the adjudicating authority to examine whether the air freight was taken into consideration while calculating the Free on Board value of export goods. 6. This Appeal has been filed to assail the order dated 24.10.2018 passed by the Commissioner (Appeals) to the extent it has confirmed the demand. 7. Shri B.L. Narasimhan, learned Counsel for the appellant, made the following submissions: (i) The amount received by the appellant from Honda India to compensate for the loss incurred by the appellant, is in the nature of liquidated damages and not in connection with the sale of goods to independent buyers. Thus, such amount is not includible in the transaction value, since there is no supply of goods to Honda India; (ii) In terms of the definition of 'transaction value' under section 4(3)(d) of the Excise Act, the consideration must flow from the buyer to the seller of the goods. The definition does not bring within its purview any amount recovered from a person other than the buyer. Therefore, ....
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....y excisable goods with reference to their value, then, on each removal of the goods, such value shall- (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. xxxxxxxxx (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.....
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....order passed by the Commissioner (Appeals) is reproduced below: "8. It is observed that the appellant has stated that HSCIL did not lift the goods manufactured by the appellant under an agreement for 2CV model and accordingly, they had to sell the goods manufactured for 2CV model to other customers as scarp. HSCIL paid the compensation for non-lifting of such material, which was mutually decided between them. In this regard it is observed that the agreement between the appellant and HSCIL do not bear any condition for payment of compensation for non-lifting of goods manufactured by the appellant for 2CV model. It is difficult to digest that when the appellant made goods for HSCIL for 2CV model i.e. the goods manufactured were tailor made, how it can be used by other persons and where such goods can be used except 2CV model. It has also not been brought on records as to who gave direction / permission (on behalf of HSCIL) to sell the goods tailor made for their 2CV model to the persons to whom the appellant has sold the goods. The appellant has contested that they had to sell goods as scrap, but from perusal of sample invoices it is observed that the buyers are not scrap dealers. ....
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....g authority and the Commissioner (Appeals) have recorded a categorical finding that the amount received by the appellant from Honda India should be included in the transaction value since the amount received was for those very auto parts which were to be sold to Honda India but were ultimately sold by the appellant to buyers since the contract was cancelled. The Commissioner (Appeals) also observed that this was actually a business arrangement between the appellant, Honda India and the buyers of scrap to evade payment of excise duty on the amount called as 'compensation' and infact Honda India actually paid some amount to the appellant for the goods sold to buyers. 16. To us also it transpires from the business arrangement between the appellant, Honda India and the buyers that the appellant received some amount from the buyers of scrap and some amount from Honda India for the value of the auto parts and there is no good reason as to why this amount received by the appellant from Honda India should not be included in the transaction value of the goods. 17. The contention of the appellant that the amount cannot be included in the transaction value since the consideration must flow ....