TMI Blog2013 (12) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (3) (d) of the Act - the eventual value payable after factoring in any liquidated damages contractually stipulated for delayed supply would be the transaction value and this value would be the value relevant for levy of duty - wherever the assessee, as per the terms of the contract and on account of delay in delivery of manufactured goods is liable to pay a lesser amount than the generically agreed price as a result of a clause, stipulating variation in the price, on account a the liability to "liquidated damages", irrespective of whether the clause is titled "penalty" or "liquidated damages", the resultant price would be the "transaction value" - such value shall be liable to levy of excise duty, at the applicable rate. - E/251 to 253/2009 - Misc. Order No. 42725/2013 - Dated:- 18-11-2013 - Mr. Justice G. Raghuram, Shri P.K. Das And Shri Mathew John, JJ. For the Appellant : Shri Ganesha Haavanur, Additional Commissioner (AR) For the Respondent : Shri Muthuvenkatraman, Advocate PER : G Raghuram Pursuant to the referral order passed by the learned Division Bench on 18.8.2011, the following question is presented to us for consideration: "Whether any de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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." 6. The present batch of appeals are preferred by Revenue against orders of the Commissioner (Appeals) granting refund of specified amounts of duty, to the respondent-assessee. 7. The assessee was engaged in manufacture of electrical transformers. During the relevant period, respondent supplied transformers to various Distribution Companies (discoms) of the Andhra Pradesh State Electricity Board (APSEB). Clause (2) of the purchase order provides for variation in the price, by way of revision (upward or downward) ab initio, to accommodate variations in prices of raw materials in terms delineated in the said clause. Clause (12) of the purchase order stipulates that for supplies made beyond the agreed delivery schedule, penalty shall be levied for an amount equivalent to % of the value of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided for breach of the contract; for payment of liquidated damages; and the mode of payment was also stipulated by providing that the amount will be deducted from the invoice. When the contract goes through, the agreed price is payable. Compensation is however payable to the buyer when there is a breach of the contract. Damages or compensation cannot therefore be regarded as the price or part of the price. The provision for deduction of the quantum of damages from the invoice price is only for the purpose of recovery of the damages; and payment of damages cannot be regarded as reduction of the agreed price. It further held that the price remained constant, namely at the agreed level and the assessee by his conduct had become liable to pay damages the quantum of which was a pre-estimate in the contract and such amount of damages was liable to be deducted from the price. This would not amount to depreciation of the price. Consequently, decisions relating to the effect of a price variation clause will not apply to a situation where the price stands altered on account of application of a clause pertaining to liquidated damages, ruled the Tribunal. 11. In CCE Calicut Vs BPL Telecom L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the penalty agreed upon between the purchaser and seller for delayed delivery, held the Tribunal. 14. United Telecom Ltd. (supra), is the only authority which specifically refers to the definition of "transaction value" in section 4 (3) (d) of the Finance Act, 1994. In this case, the appellant-assessee was a manufacturer of telecom equipment which was supplied to BSNL. Assessee filed a refund claim on the basis of difference in price quoted in the purchase order and invoices under the cover of which the goods were cleared, resulting in liquidated damages applied by BSNL for delayed delivery of the goods. Revenue rejected the claim for refund on the ground that liquidated damages administered by the purchaser was not an abatable discount in the "transaction value", in terms of the definition of expression in Section 4 (3) (d). Considering the issue in the context of amended provisions of Section 4 and the definition of "transaction value" under Section 4 (3) (d), the Tribunal recognized the distinction between "penalty" and "liquidated damages"; culled out the relevant principles in relation to whether a sum stipulated for delayed delivery in a contract is a stipulation by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction value" in Section 4 (3) (d) enables levy of duty on the transaction value paid or payable for the goods. The value payable in a case where liquidated damages is applied would therefore be the consequent value and this would constitute the "transaction value". 17. Except the decision of United Telecom (supra) followed in HFCL (supra) which are clearly and apparently after due consideration of provisions of the amended Section 4 read with definition of "transaction value" in Section 4 (3) (d), other decisions adverted to above were either on the basis of provisions of Section 4 prior to its amendment by Finance Act, 2000 or without analysis of provisions of the amended Section 4 and the distinct concepts of "penalty" and "liquidated damages", pointed out in United Telecom Ltd. 18. The decision in Electron Energy Equipments Ltd. (supra), which is in conflict with the decision in United Telecom Ltd. (noticed by the referral order), is subsequent to amendment of Section 4 vide the Finance Act, 2000. However, this decision did not proceed on any analysis of the amended provisions of Section 4 or due consideration of the definition of "transaction value" in Section 4 (3) (d). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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