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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 ..... [Suzuki]. Suzuki carrys out the Research and Development and Maruti pays Suzuki for the specifications, drawings and designs. However, Maruti did not charge its vendors (including the appellant) for the specifications, drawings and designs. 4. A Show Cause Notice dated 29.8.2019 [SCN] was issued to the appellant proposing to include the notional cost of the drawings and designs provided by Maruti to the appellant as "additional consideration for sale" of the goods which the appellant had sold to Maruti. Similar SCNs were issued to almost all other vendors of Maruti. 5. The proposals in the SCN were confirmed by the impugned order and demand of duty of Rs. 73,55,120/- covering the period April 2016 to June 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valued and aggregated accordingly, namely : - (i) value of materials, components, parts and similar items relatable to such goods; (ii) value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods; (iii) value of material consumed, including packaging materials, in the production of such goods; (iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods. ............" 9. 'Additional' in the expression 'additional consideration for sale' refers to that 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Act 9 of 1872.-The unrepealed provisions of the Indian Contract Act, 1872, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to contracts for the sale of goods." 13. Therefore, it is appropriate to apply the definition of 'consideration' under the Contract Act to interpret the expression 'additional consideration for sale' under the Excise Act and the Valuation Rules. The relevant provisions of the Contract Act are as follows: "2. Interpretation clause.-In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:- (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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sires the buyer to pay him the price either by himself or through others. 16. We now proceed to examine the nature of the drawings, designs and specifications in dispute. It is not disputed that they were provided by Maruti to the appellant and that they were valuable inasmuch as they were developed by its parent company Suzuki,Japan after much effort and they were given to Maruti for a monetary consideration. Therefore, Revenue was correct in its submission that the specifications and drawings are of value. Insofar as the transaction between Suzuki Japan and Maruti is concerned, the specifications, drawings and designs are 'the consideration' 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conform to them. These specifications, drawings and designs were result of an assessment and formulation of its own requirements by Maruti and their articulation while sending requests to the appellant for a quotation. 22. To sum up, for something to be an additional consideration for sale as per Section 4(1) (b) of the Central Excise Act and Rule 6 of the Valuation Rules, it has to be 'consideration' in the first place which, as defined under the Indian Contract Act, has to flow to the promisor from the promisee or anyone else at the desire of the promisor. Before the proposal of the appellant and its acceptance by 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. Addit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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