2004 (9) TMI 463 - AT - Central Excise

Summary

Issues:
1. Waiver of duty and penalty based on compensation received under a contract agreement.
2. Interpretation of compensation as additional consideration for goods supplied or liquidated damages for breach of contract.
3. Prima facie case favoring the appellant on merits and time-bar.

Analysis:
1. The appellants sought waiver of duty and penalty amounting to Rs. 1,64,36,241/-, contending that the compensation received under a contract agreement with M/s. Mukund Ltd. was not additional consideration for goods supplied but liquidated damages for non-performance of the contract. The department alleged that the compensation was related to supplies made, leading to the initiation of proceedings against the appellants.

2. The Senior Counsel argued that the Commissioner's finding acknowledged the compensation as liquidated damages in Para 35, emphasizing that no consideration was received for goods not supplied. Citing the case of Inox Air Products Ltd. v. CCE, it was asserted that compensation for breach of contract cannot be considered as part of assessable value. The submission highlighted the absence of actual goods sale and consideration, challenging the department's stance on additional consideration.

3. In response, the SDR opposed the waiver, asserting that the compensation was linked to goods supplied, distinguishing the cited case's circumstances. The department contended that the compensation was for supplies made, not for non-supplies, indicating a different scenario from the case referred to by the Senior Counsel.

4. After a thorough review of the arguments and judgments, the Tribunal observed that the appellants received compensation as liquidated damages for not meeting the contract's quantity obligations, not as additional consideration for goods supplied. The Tribunal noted the need for the Revenue to prove the connection between the compensation and supplies at a later stage. Consequently, the stay application was granted, waiving the pre-deposit and halting recovery proceedings until the appeal's resolution. The Tribunal acknowledged the appellants' prima facie case in their favor on both merit and time-bar, scheduling the final hearing for February 14, 2005, due to the substantial amounts involved.