AI Drafter 
TaxTMI 
TaxTMI 
2025 (2) TMI 514
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....had obtained the designs and drawings from its principal M/s. Suzuki Motor Corporation Limited, Japan [Suzuki]. Suzuki carried out the Research and Development and Maruti paid Suzuki for the specifications, drawings and designs. However, Maruti did not charge its vendors (including the appellant) for the specifications, drawings and designs. 4. A Show Cause Notice dated 19.2.2019 [SCN] was issued to the appellant proposing to include the notional cost of the drawings and designs provided by Maruti to the appellant as "additional consideration for sale" of the goods which the appellant had sold to Maruti. Similar SCNs were also issued to other vendors of Maruti. 5. The proposals in the SCN were confirmed by the order dated 18.01.2024 [Impugned order] passed by the Additional Director General and demand of duty of Rs. 3,35,610/- covering the period February 2014 to June 2017 was confirmed and an equal amount was imposed as penalty. 6. We have heard learned counsel for the appellant and learned authorised representative for the Revenue and perused the records. 7. The issue which falls for consideration in this appeal is whether or not the specifications, drawings and desig....
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....h value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely : - (i) value of materials, components, parts and similar items relatable to such goods; (ii) value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods; (iii) value of material consumed, including packaging materials, in the production of such goods; (iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods. ............" 9. 'Additional' in the expression 'additional consideration for sale' refers to that which is in addition to the price. The two words central to deciding this issue are 'consideration' and 'sale'. The term 'consideration' is not defined in the Excise Act but the term 'sale' is defined in section 2(h) as follows: "Section 2 ....
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....implicit- it is appropriate to examine the term 'consideration' under the Contract Act in the absence of any other definition of this term under the Sale of Goods Act or the Excise Act. Section 3 of the Sale of Goods Act makes it explicit that the provisions of the Contract Act would apply to sales and it reads as follows. "3. Application of provisions of Act 9 of 1872.-The unrepealed provisions of the Indian Contract Act, 1872, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to contracts for the sale of goods." 13. Therefore, it is appropriate to apply the definition of 'consideration' under the Contract Act to interpret the expression 'additional consideration for sale' under the Excise Act and the Valuation Rules. The relevant provisions of the Contract Act are as follows: 2. Interpretation clause.-In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:- (a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or ....
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....hus, the scope of the consideration under the three Acts varies somewhat, but what does not vary is that it has to be at the desire of the promisor done either by the promisee or by someone else. The necessary corollary is that it has to relate to the promise. In contracts of sale (either written or implicit), the seller promises to transfer the possession or property of the goods to the buyer and in return, he desires the buyer to pay him the price either by himself or through others. 16. We now proceed to examine the nature of the drawings, designs and specifications in dispute. It is not disputed that they were provided by Maruti to the appellant and that they were valuable inasmuch as they were developed by its parent company Suzuki, Japan after much effort and they were given to Maruti for a monetary consideration. Therefore, Revenue was correct in its submission that the specifications and drawings are of value. Insofar as the transaction between Suzuki Japan and Maruti is concerned, the specifications, drawings and desgins are 'the consideration' which Maruti had received in exchange for 'the licence fee' which it paid to Suzuki Japan. 17. The question, however, is whe....
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....ion with the production or sale of goods but in connection with the RFQ inviting bids/proposals. They helped the appellant in formulating its proposals/bids and submitting them to the Maruti. They were not meant for production or sale of such goods. Of course, once the proposals/bids of the appellants were accepted, the goods produced and sold have to conform to the specifications, drawings and designs provided by Maruti to ensure that the goods conform to them. These specifications, drawings and designs were result of an assessment and formulation of its own requirements by Maruti and their articulation while sending requests to the appellant for a quotation. 22. To sum up, for something to be an additional consideration for sale as per Section 4(1) (b) of the Central Excise Act and Rule 6 of the Valuation Rules, it has to be 'consideration' in the first place which, as defined under the Indian Contract Act, has to flow to the promisor from the promisee or anyone else at the desire of the promisor. Before the proposal of the appellant and its acceptance by Maruti, there was no promise, no promisor and no promisee. The specifications or drawings and designs supplied whil....