2016 (1) TMI 102 - AT - Central Excise

Denial of refund claim - Valuation - Reduction in value due to liquidated damage (LD) - delay in supply of the goods to their customers/purchasers as per the clause in the agreement with the buyers, the liquidated damage (LD) charges were deducted as compensation from the invoice price of the goods - Held that - Decisions quoted above and especially the ratio of the Tribunal s Larger Bench decision in the case of Victory Electricals Ltd. (2013 (12) TMI 81 - CESTAT CHENNAI ), the liquidated damages (LD) had to be factored in to arrive at the correct transaction value which has to be treated as assessable value for payment of Central Excise duty; whatever the duty paid in excess on account of non-factoring of liquidated damages would be liable to be refunded to the appellants. - Decided in favour of assessee.

Summary

Issues:
- Rejection of refund claim for duty paid in excess due to deduction of liquidated damages from invoice price.

Analysis:
1. The matter in these appeals revolves around the rejection of a refund claim for duty paid in excess because of the deduction of liquidated damages (LD) from the invoice price. The appellants argue that the duty is payable on the transaction value, which was reduced due to the deduction of liquidated damages. They rely on various case laws to support their claim.

2. The definition of "transaction value" under Section 4(3)(d) of the Central Excise Act, 1944 is crucial in determining the duty payable. The Tribunal's Larger Bench decision in the case of Victory Electrical Ltd elaborated on this definition, emphasizing that the eventual value after factoring in any liquidated damages for delayed supply should be considered the transaction value for levy of duty.

3. The Tribunal held that when an assessee is liable to pay a lesser amount than the agreed price due to a clause on liquidated damages for delayed delivery, the resultant price should be treated as the transaction value for excise duty purposes. This interpretation ensures that duty is levied on the correct transaction value, even if it is lower due to such contractual provisions.

4. The Revenue argued that liquidated damages are merely adjustments between parties and duty should be paid on the full invoice price. However, based on the Tribunal's decision and the principles of transaction value, it was concluded that liquidated damages must be factored in to determine the assessable value for excise duty.

5. Consequently, considering the facts, case laws, and the Tribunal's decision in Victory Electricals Ltd., it was ruled that any excess duty paid due to the non-inclusion of liquidated damages in the transaction value should be refunded to the appellants. As a result, all three appeals were allowed, granting consequential benefits to the appellants.