TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 512
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....roviso to section 114(1) of the Central Excise Act, 1944 and order for recovery of the same from M/s Crompton Greaves Limited, Stamping Division. 2. M/s Crompton Greaves Limited, Stamping Division, is also ordered to pay interest on the duty confirmed in terms of the then section 11AB of the Central Excise Act, 1944. 3. I also impose penalty of Rs. 12,110/- (Rs. Twelve Thousand One Hundred Ten Only) on the assessee M/s Crompton Greaves Limited, Stamping Division, in terms of the provisions of Rule 25 of Central Excise Rules, 2002 read with section 11AC of the Central Excise Act, 1944." 2.1 Appellants are holders of central excise registration for manufacture of excisable goods falling under Chapters 72, 82, 84 & 85 of the first Schedule to the Central Excise Tariff Act. 2.2 During the course of audit of the records of the appellant, it was observed that the appellant had sold scrap of stamping by auction and as per the terms and conditions the bidder was required to lift the agreed quantity of scrap within a specified period on the auctioned value. The person bidding was required to deposit certain amounts as earnest money for participating in the bid process and it was provi....
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.... decision of the Tribunal in the case of Victory Electricals Ltd. [2013 (298) ELT 534 (Tri.-LB)] in support of his case. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of argument. 4.2 For confirming the demand against the appellant, along with interest and penalty, Commissioner (Appeals) has in the impugned order observed as follows:- "6. The term transaction value has come into effect from 1.7.2000. The definition of transaction value reads as under: 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 p....
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.... has been observed as follows:- "11. The expression 'any amount that the buyer is liable to pay to' is of significance. This expression shows that, apart from the price of the goods, the buyer should also be liable to pay an additional amount to the manufacturer/seller. In other words, the sale of the goods would not be made unless the buyer is also to pay an additional amount to the manufacturer, apart from the price of the goods. This is also supported by use of expression 'by reason or' or 'in connection with the sale' of the goods. The expression 'in connection with the sale of the goods' would only mean that but for the payment of the additional amount, the sale of the goods would not take place. When we keep in mind the aforesaid legal position, we find no error in the view taken by the Tribunal giving benefit to the assessee. Both the sides were in unison in accepting the position that no major change had been incorporated w.e.f. 1-7-2000 with emphasis on the 'different transaction value' from the 'assessable value', the essence of valuation principles had not undergone major change and the decisions delivered by this Court with regard to unamended provision on the princip....
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.... the respondents. In our view, it is not necessary for us to record our views on the correctness of the judgment delivered by the larger bench in the case of Maruti Suzuki (Supra). Similarly, in our view, it is not necessary to express any view on the order-in-original dated 5th December, 2011. 42. We have considered the provisions of Section 4(1)(a) as amended as well as the provisions of Section 4 as they stood prior to the amendment which came into effect from 1st July, 2000. We are in agreement with the submission advanced by learned Senior Counsel Mr. Sridharan that the provisions of Section 4 as amended are not materially different from the provisions of Section 4 as were prevailing prior to 1st July, 2000. By the amendment, a new term has been introduced by name "transaction value" and the said term transaction value has been specifically defined in Section 4(3)(d) of the said Act. The present Section 4(1)(a) r/w definition of term transaction value gives more clarity and all doubts as to how the assessable value is to be arrived at are removed. It is also noted that the various items incorporated in the term transaction value as defined in Section 4(3)(d) of said Act as f....
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....y cast on him as per the dealership agreement. The contention of the petitioners that the petitioners do not charge the dealer for the expenses incurred by the dealer towards PDI and said services is required to be accepted. From the record it is clear that the case of the petitioners so far as the amount incurred by the dealer towards PDI and said services does not form any of the clauses viz. (a) Any amount charged for (b) Amount charged to make provision for (c) Any amount that the buyer is liable to pay to the assessee (d) Any amount that the buyer is liable to pay on behalf of the assessee. The record indicates that once a car is sold by the petitioners to the dealer at a price, the dealer is not required to pay any further amount to the petitioners on account of PDI and free after sales services/after sales services. It is clear that when the petitioners are selling the car to a dealer, price is the sole consideration and the petitioners and the dealer are not related to each other. Having complied with these requirements set out in Section 4(1)(a) of the said Act, the assessable value of the Cars will have to be treated as the one which will be the transaction value. The tra....
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.... customer would not be able to claim the benefit of the warranty. This will go to show that the petitioners undertake responsibilities so far as the warranty aspect is concerned provided the customer takes the benefit of PDI and said services. It has no bearing on the assessable value as it is abundantly clear that to perform PDI as well as render said services is on the dealer's obligation on account of dealership agreement and not on any other count. Once it is held that the PDI and said services are not provided by the dealer on behalf of the petitioners, it cannot be treated as consideration for sale. It also cannot be treated as a deferred consideration. The respondents while issuing Circular dated 1st July, 2002 have wrongly referred to the Rule 6 of the said Rules and have wrongly linked the expenses incurred for PDI and said services with expenses for advertisement or publicity. It is required to be noted that the provisions of the said Rules will not be applicable to the facts of this case as the transaction between the petitioners and the dealer does not fall within the ambit of Section 4(1)(b) of the said Act. The transaction of sale of a car between the petitioners and ....
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....ought into existence a deeming provision that is to say the respondents have treated all the manufacturers of cars on one platform and by fiction taken a decision to add the expenses incurred towards PDI and said services in the assessable value. It will have to be mentioned that in all cases where the expenses incurred towards PDI and said services are solely borne by the dealer and the manufacturer like petitioners have nothing to do with the said expenses then adding those expenses in the assessable value would be contrary to the provisions of Section 4(1)(a) r/w Section 4(3)(d) of the said Act. Looking to the facts and circumstances of this case, the respondents have not been able to place on record any material to show that the amount incurred towards PDI and said services can fall within the definition of the transaction value." We agree with the enunciation of legal position stated by the High Court. 16. We have also to keep in mind these cases pertain to the period post 2000. It is also to be borne in mind that the clarification very categorically proceeded on the basis that the services were provided free by the dealer 'on behalf of the assessee' and the same was 'duri....
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....of the Section. Relevant extract from the same is reproduced herewith as under: "6. ...It may also be noted that where the assessee charges an amount as price for his goods, the amount so charged and paid or payable for the goods will form the assessable value. If, however, in addition to the amount charged as price from the buyer, the assessee also recovers any other amount by reason of sale or in connection with sale, then such amount shall also form part of the transaction value for valuation and assessment purposes. Thus if assessee splits up his pricing system and charges a price for the goods and separately charges for packaging, the packaging charges will also form part of assessable value as it is a charge in connection with production and sale of the goods recovered from the buyer ... 7. It would be seen from the definition of 'transaction value' that any amount which is paid or payable by the buyer to or on behalf of the assessee, on account of the factum of sale of goods, then such amount cannot be claimed to be not part of the transaction value. In other words, if, for example, an assessee recovers advertising charges or publicity charges from his buyers, either at ....
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....contractually stipulated for delayed supply would be the transaction value and this value would be the value relevant for levy of duty. 20. On the aforesaid analysis, we answer the reference by holding that wherever the assessee, as per the terms of the contract and on account of delay in delivery of manufactured goods is liable to pay a lesser amount than the generically agreed price as a result of a clause (in the agreement), stipulating variation in the price, on account of liability to "liquidated damages", irrespective of whether the clause is titled "penalty" or "liquidated damages", the resultant price would be the "transaction value"; and such value shall be liable to levy of excise duty, at the applicable rate." 4.8 In South Eastern Coalfields Ltd. [2021 (55) GSTL 549 (Tri.-Del.)], the Tribunal in paras 38 to 43 has observed as follows:- "38. The decision of the Supreme Court in Fateh Chand does not help the Department. The facts indicate that the Delhi Improvement Trust had granted lease hold rights for ninety years to Dr. M.M. Joshi in respect of a property. The relevant clauses of the agreement are :- (i) The plaintiff has agreed to sell the building to the defen....
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....t from the breach'. The Supreme Court also found that there was no evidence that any loss was suffered by the plaintiff in consequences of the default by the defendant, save as to the loss suffered by being kept out of possession of the property. The Supreme Court, therefore, held that plaintiff would be entitled to retain only an amount of Rs. 1000/- that was received as earnest, out of amount of Rs. 25,000/-. 42. The conclusion drawn by the Learned Authorized Representatives of the Department from the aforesaid decision of the Supreme Court that compensation received is 'synonymous' with 'tolerating' or that the Supreme Court acknowledged that in a breach of contract, one party tolerates an act or situation is not correct. 43. It is, therefore, not possible to sustain the view taken by the Principal Commissioner that penalty amount, forfeiture of earnest money deposit and liquidated damages have been received by the appellant towards "consideration" for "tolerating an act" leviable to service tax under Section 66E(e) of the Finance Act." 4.9 In Steel Authority of India Ltd. [2021 (55) GSTL 34 (Tri.-Chennai)], the Tribunal has in paras 16 to 18 held as under:- "16. In this ....
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....he intention of the appellant to impose any penalty upon the other party nor is it the intention of the other party to get penalized. 28. It also needs to be noted that section 65B(44) defines "service" to mean any activity carried out by a person for another for consideration. Explanation (a) to section 67 provides that "consideration" includes any amount that is payable for the taxable services provided or to be provided. The recovery of liquidated damages/penalty from other party cannot be said to be towards any service per se, since neither the appellant is carrying on any activity to receive compensation nor can there be any intention of the other party to breach or violate the contract and suffer a loss. The purpose of imposing compensation or penalty is to ensure that the defaulting act is not undertaken or repeated and the same cannot be said to be towards toleration of the defaulting party. The expectation of the appellant is that the other party complies with the terms of the contract and a penalty is imposed only if there is noncompliance. 29. The situation would have been different if the party purchasing coal had an option to purchase coal from 'A' or from 'B' and....