2015 (11) TMI 893 - AT - Central Excise

Denial of refund claim - reduction in price / transaction value due to delay in delivery of manufactured goods as per agreed contract terms - liquidated damage charges imposed by MTNL/BSNL/DoT on delayed supplies by the assessee - Held that - Wherever the assessee, as per terms of the contract between the parties 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 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 alone liable to levy of excise duty, at the applicable rate. - In the light of the judgment of the Larger Bench 2013 (12) TMI 81 - CESTAT CHENNAI , the assessee is entitled to succeed. - Decided against Revenue.

Summary

Issues:
Appeal by Revenue against Appellate order denying refund of excise duty on liquidated damage charges imposed by MTNL/BSNL/DoT for delayed supplies by the assessee.

Analysis:
The judgment pertains to appeals filed by both the Revenue and the assessee regarding the denial of a refund of excise duty due to liquidated damage charges imposed for delayed supplies by the assessee to MTNL/BSNL/DoT. The Revenue's appeal, Excise Appeal No. 3210/2004, was against the Appellate order dated 29-3-2004, while the assessee's appeal, Excise Appeal No. 1016/2005, was against the order dated 11-11-2004 confirming the denial of the refund by the adjudicating authority. The dispute covered the period from 30-7-2001 to 30-10-2001 and 29-6-2002 to 28-10-2002.

The key issue revolved around the interpretation of a clause in the contract between the parties regarding liquidated damages and its impact on the excise duty liability. The Tribunal referred to a Larger Bench decision in Commissioner of Customs and Central Excise, Hyderabad IV v. Victory Electricals Ltd., where it was held that in cases where the assessee is liable to pay a lesser amount due to a clause on liquidated damages for delayed delivery, the resultant price would be considered the 'transaction value' for excise duty purposes, regardless of whether the clause is labeled as a 'penalty' or 'liquidated damages'.

In light of the Larger Bench decision, the Tribunal concluded that the assessee was entitled to succeed. Consequently, the Revenue's appeal, Excise Appeal No. 3210/2004, was rejected as the Appellate order had a similar view to the Larger Bench decision. On the other hand, the assessee's appeal, Excise Appeal No. 1016/2005, was allowed as the Appellate authority's conclusion was at variance with the law declared by the Larger Bench. The judgment specified that there would be no order as to costs in this matter.