9911796707
TMI Blog2012 (5) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... in or in relation to the manufacture of their final products in terms of Cenvat Credit Rules, 2004. The appellant manufacture Automobile Cabin parts for M/s. Eicher Motors Ltd. in terms of a manufacture and supply agreement between them. As per the conditions of this agreement, the appellant are entitled for "Operational Compensation" at specified rates if in a financial year M/s. Eicher Motors Ltd. failed to lift certain specified quantity of the goods. The operational compensation amount received by the appellant during the year 2005-2006, 2006-2007 and 2007-2008, as per their balance sheet was Rs. 1,40,35,999.00 and Rs. 1,57,37,000.00 and Rs. 1,59,61,000.00 respectively. It was also found that as per para 9.1 of the Article 9 of the Agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her in said year nor carried forward to the subsequent years." 2. From the above it appeared that the "operational compensation amount" received by the appellant from M/s. Eicher Motors Ltd. was part of the prices of the goods sold by the appellant to M/s. Eicher Motors Ltd. and since no duty has been paid on this amount, the department was of the view that the same has been short paid and is recoverable from them. It is on this basis that the show cause notice dated 29-5-2009 was issued to the appellant for - (a) recovery of central excise duty amounting to Rs. 74,89,162/- along with interest on it at the applicable rate under proviso to-Section 11A(l) of the Central Excise Act along with interest under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation reiterating the findings of the Commissioner in the impugned order and pleaded that as per the appellant's agreement with M/s. Eicher Motors Ltd., M/s. Eicher Motors Ltd. were required to lift a specified quantity of the finished goods each year so as to ensure a certain minimum Return on Equity to the appellant, that the amount received as "operational compensation amount" is a compensation for the failure of M/s. Eicher Motors Ltd. to lift the required quantity of the finished goods from the appellant so as to ensure certain minimum return on equity in terms of their agreement, that as per the appellant's agreement with M/s. Eicher Motors Ltd., the price to be paid was linked with certain minimum Return on Equity, that in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs had undertook for lifting certain minimum quantity of the goods and in the event of failure of M/s. Eicher Motors to lift that minimum quantity of finished goods, they were required to pay an amount called "operational compensation" to the appellant so as to ensure the agreed return on equity to the appellant. Return on equity depends upon "net profit", which, the expenses being constant, depends upon the Sales Turnover, which, in turn, is the unit price multiplied by quantum of sales. Thus, what the appellant, by virtue of their agreement with M/s. Eicher have been guaranteed is a certain minimum sales turnover and if on account of failure of M/s. Eicher to purchase the required quantity of finished goods from the appellant at the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X
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