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TMI Blog2025 (2) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... or. This something could be done or abstained from doing either by the promisee himself or by someone else but it must be at the desire of the promisor - the consideration could be in cash or some other valuable or simply something done or abstained from doing under the Contract Act but under Sale of Goods Act, only price can be the consideration. Under the Central Excise Act,consideration has to be for 'cash, deferred payment or some other valuable consideration". Thus, the scope of the consideration under the three Acts varies somewhat, but what does not vary is that it has to be at the desire of the promisor done either by the promisee or by someone else. The question, however, is whether these specifications, drawings and designs of value are 'consideration' in the transactions between Maruti and the appellant. As discussed, for something to be a consideration, it must be at provided at the desire of the promisor by either 'the promisee' or someone else - For a promise to come into existence, there must be a proposal (or offer) from the seller and its acceptance by the buyer. Until the proposal is made and accepted, there is no promise. Once the offer is made and accepted, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne 2017 was confirmed and an equal amount was imposed as penalty. 6. We have heard learned counsel for the appellant and learned authorised representative for the Revenue and perused the records. 7. The issue which falls for consideration in this appeal is whether or not the specifications, drawings and designs supplied by Maruti to the appellant when sending requests for quotations (RFQ) can be considered as "additional consideration for sale" of the goods which the appellant had manufactured and sold to Maruti. According to Revenue, they form "additional consideration for sale" and according to the appellant, they do not. 8. It is undisputed that if they form 'additional consideration for sale', then their value must be included in the assessable value as per section 4(1) (b) of the Central Excise Act,1944 [Excise Act] and Rule 6 of the Central Excise Valuation (Determinationof Price of Excisable Goods) Rules, 2000 [Valuation Rules] and if they do not form 'additional consideration for sale', then they cannot be included and the assessable value will be the transaction value itself as per section 4(1) (a) of the Excise Act. The relevant portion of section 4 and Valuation Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at which is in addition to the price. The two words central to deciding this issue are 'consideration' and 'sale'. The term 'consideration' is not defined in the Act but the term 'sale' is defined in section 2(h) as follows: "Section 2 Definitions: (h) "sale" and "purchase", with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration;" 10. Thus, the term 'sale' in the Excise Act is defined slightly differently from the sale in the Sale of Goods Act, 1930 [Sale of Goods Act] section 4 of which defines sale as transfer of property for a price and the term 'price' is defined under section 2(10) as money consideration. These sections of Sale of Goods Act read as follows: "2. Definitions-In this Act, unless there is anything repugnant in the subject or context,-- (10) "price" means the money consideration for a sale of goods; 4. Sale and agreement to sell.-- (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text:-- (a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal; (b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise; (c) The person making the proposal is called the "promisor", and the person accepting the proposal is called the "promisee"; (d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise; (e) Every promise and every set of promises, forming the consideration for each other, is an agreement; (f) Promises which form the consideration or part of the consideration for each other are called reciprocal promises; (g) An agreement not enforceable by law is said to be void; (h) An agreement enforceable by law is a contract; ………" 14. Thus, for something to be 'considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration' which Maruti received in exchange for 'the licence fee' which it paid to Suzuki Japan. 17. The question, however, is whether these specifications, drawings and designs of value are 'consideration' in the transactions between Maruti and the appellant. As discussed, for something to be a consideration, it must be at provided at the desire of the promisor by either 'the promisee' or someone else. 18. For a promise to come into existence, there must be a proposal (or offer) from the seller and its acceptance by the buyer. Until the proposal is made and accepted, there is no promise. Once the offer is made and accepted, the promise makes the seller the promisor and the buyer the promisee. Before the offer and its acceptance, there is neither any promise nor any promisor-promisee relationship between them as they were only prospective seller and prospective buyer. When the appellant submitted its quotations and Maruti accepted them, Maruti became the promisee and the appellant the promisor. 19. To design a new car, all its parts will also have be designed to a great detail and this design of parts requires expenditure and such designs were acquired by Maruti from Suzuki fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maruti, there was no promise, no promisor and no promisee. The specifications or drawings and designs supplied while inviting bids- regardless of their value- cannot be called 'consideration' but can only be called articulation of the needs of Maruti. They were also not provided at the desire of the promisor(the appellant) but by Maruti (the promisee) on its own accord to elicit proposals (quotations). 23. In a batch of appeals decided by this Tribunal by Final Order no. 55140-55337/2024 dated 12.3.2024, in Denso India Private Limited vs. Additional Director General (Adjudication), appeals in respect of other vendors of Maruti were decided in favour of the appellants on an identical issue. The relevant extract of the Final Order is reproduced below: "50. The inevitable conclusion, therefore, that follows from the aforesaid discussion is that the notional cost of drawings and designs supplied free of cost by Maruti to the vendors cannot be included in the assessable value of the parts and components manufactured by vendors and cleared to Maruti for the purpose of payment of central excise duty. 51. In this view of the matter, it would not be necessary to examine the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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