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TMI Blog2021 (10) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... lation of the contract. This amount obviously was to make up for the reduced price which the appellant received from the sale of auto parts manufactured by the appellant. The Department alleges that this was infact the balance consideration received by the appellant from Honda India under the guise of compensation and, therefore, should be included in the transaction value - It clearly transpires from the business arrangement that the appellant had received a substantial amount from Honda India, even though the terms of the contract did not provide for payment of any amount to the appellant if the contract of supply of auto parts was cancelled by Honda India. What is also important to notice is that even for the subsequent year the appellant also claimed that it had to sell the auto parts as scrap since the contract was cancelled. It transpires from the business arrangement between the appellant, Honda India and the buyers that the appellant received some amount from the buyers of scrap and some amount from Honda India for the value of the auto parts and there is no good reason as to why this amount received by the appellant from Honda India should not be included in the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther direction that the appellant could produce the relevant records for this purpose. The appeal was, therefore, partly allowed by the Commissioner (Appeals). 2. The appellant claims that it is engaged in the manufacture of auto parts falling under Chapter 87 of the First Schedule to the Central Excise Tariff Act, 1985 [the Tariff Act ]. It availed and utilized CENVAT credit on inputs, capital goods and input services for discharging its output duty liability, in terms of the provisions of the CENVAT Credit Rules, 2004. [the Credit Rules ] Such auto parts manufactured by the appellant were sold to several buyers spread throughout the country. One such buyer of the appellant was Honda India, with whom the appellant entered into a contract dated 14.01.2009 for supply of auto parts and other products used in the manufacture of motor vehicles. 3. The appellant further asserts that it imported raw material like Flat Rolled products of Chapter Heading 7225 of the Tariff Act in open vessels from various countries to save on transportation cost. However, in view of urgent requirement of Honda India, inasmuch as its foreign counterpart located in Thailand [Honda, Thailand ] was ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant from Honda India to compensate for the loss incurred by the appellant, is in the nature of liquidated damages and not in connection with the sale of goods to independent buyers. Thus, such amount is not includible in the transaction value, since there is no supply of goods to Honda India; (ii) In terms of the definition of transaction value under section 4(3)(d) of the Excise Act, the consideration must flow from the buyer to the seller of the goods. The definition does not bring within its purview any amount recovered from a person other than the buyer. Therefore, the compensation received from Honda India cannot be included in the transaction value of the goods sold to independent buyers (other than Honda India); (iii) In view of the provisions of rule 5 of the Central Excise (Valuation) Rules, 1975 [the 1975 Valuation Rules ], the additional consideration (compensation received from Honda India) is not flowing from independent buyers to the appellant and so the same is not liable to be added for the purpose of valuation. (iv) The extended period of limitation could not have been invoked; and (v) Penalty and interest were not imposable. 8. Shri Ravi Kapoor, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. (emphasis supplied) 11. As noticed above, the appellant is engaged in the manufacture of auto parts which the appellant sells to many buyers. The appellant had entered into a contract with Honda India for supply of auto parts used in the manufacture of motor vehicles. For the purpose of manufacture of auto parts, the appellant had imported raw material and in view of the urgent requirement of Honda India, it air-lifted the raw material which resulted in extra cost of transportation. However, Honda India cancelled the purchase order. The appellant claims that the auto parts which it had ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured by the appellant for 2CV model. It is difficult to digest that when the appellant made goods for HSCIL for 2CV model i.e. the goods manufactured were tailor made, how it can be used by other persons and where such goods can be used except 2CV model. It has also not been brought on records as to who gave direction / permission (on behalf of HSCIL) to sell the goods tailor made for their 2CV model to the persons to whom the appellant has sold the goods. The appellant has contested that they had to sell goods as scrap, but from perusal of sample invoices it is observed that the buyers are not scrap dealers. It has not been brought on record that in what manner compensation was decided. The debit note submitted by the appellant donot reveal the manner in which compensation was calculated. In this case goods are manufactured as per the requirement of HSCIL for use in 2CV model and as per submissions of the appellant this model was discontinued in 2012. Since the said model was discontinued, it is not understood what the buyer will do with the tailor made parts. It appears to be business arrangement between the appellant, HSCIL and the buyer of goods to evade payment of excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsation and infact Honda India actually paid some amount to the appellant for the goods sold to buyers. 16. To us also it transpires from the business arrangement between the appellant, Honda India and the buyers that the appellant received some amount from the buyers of scrap and some amount from Honda India for the value of the auto parts and there is no good reason as to why this amount received by the appellant from Honda India should not be included in the transaction value of the goods. 17. The contention of the appellant that the amount cannot be included in the transaction value since the consideration must flow only from the buyer to the seller of goods, in view of the business arrangement arrived at in the present case, cannot be accepted. 18. The decision of the Tribunal in Haryana Drinks Pvt. Ltd. vs. Commissioner of C. Ex., New Delhi [2000 (121) E.L.T. 718 (Tribunal) ] will not come to the aid of the appellant as that was a case on entirely different facts. The issue that arose was regarding reimbursement of expenditure for advertising, marketing and sales promotions. This amount was sought to be added to the assessable value of soft drinks for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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