2017 (5) TMI 448 - AT - Central Excise

Valuation - inclusion of amount collected towards compensation for non lifting of the goods - It is alleged that the recovery of amount from the customers as operational compensation is an additional consideration and will form part of the assessable value of the goods already cleared to such customer - Held that - In terms of section 4 of the CEA, excise duty is required to be paid on the transaction value which is charged by the manufacturer from the whole sale customers. In the present case excise duty has already been paid on the transaction value of the components supplied to M/s. Eicher. The dispute is with reference to the compensation amount received by the appellant. Such amounts cannot be considered as additional consideration for the goods actually sold - similar issue decided in the case of JINDAL PRAXAIR OXYGEN CO. LTD. Versus COMMISSIONER OF C. EX., BELGAUM 2006 (8) TMI 461 - CESTAT, BANGALORE , where it was held that the compensation paid by the buyer to the assessee at previously agreed rate on account of the former's failure to lift the agreed quantity of excisable goods Nitrogen etc. was in the nature of liquidated damages for breach of contract, not includible in the assessable value of the goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Identification of additional consideration received by the appellant as part of assessable value for excise duty calculation.

Analysis:
The appellant, engaged in manufacturing automobile cabin parts, availed Cenvat Credit but faced duty demand and penalties due to alleged additional consideration received as "operational compensation" from customers. The Commissioner held that such compensation formed part of the assessable value, leading to duty evasion claims. The appellant argued that the compensation was for non-lifting of goods, akin to liquidated damages not subject to Central Excise duty. The dispute centered on whether the compensation constituted additional consideration for goods sold. The Tribunal considered the appellant's investment agreement with a customer, where compensation ensured a minimum return, and concluded that such compensation was not part of the transaction value for excise duty calculation.

The Tribunal referenced precedents like Praxair India Ltd. and Jindal Praxair Oxygen Co. Ltd., where similar issues were resolved in favor of the manufacturers. These cases highlighted that compensation for failure to lift guaranteed quantities of goods did not constitute additional consideration for goods sold. Citing these decisions, the Tribunal ruled that the compensation received by the appellant should not be included in the assessable value for excise duty purposes. Consequently, the Tribunal set aside the Commissioner's orders, dismissing one appeal and allowing another.

In summary, the judgment addressed the crucial issue of whether compensation received by the appellant should be considered additional consideration for excise duty calculation. By analyzing the nature of the compensation, investment agreements, and relevant legal precedents, the Tribunal determined that such compensation did not form part of the assessable value. This decision aligned with previous rulings on similar matters, providing clarity on the treatment of such payments in excise duty assessments.