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TMI Blog2017 (4) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... em. Revenue sought to include the same in the assessable value as additional consideration. 2. The Ld. Counsel for the appellant argued that they were manufacturing finished goods by using the cylinders and the raw materials. He argued that they were required under law to add only that proportion of the cylinder cost, as was attributable to the actual production, and not the total cost of the cylinders. Ld. Counsel has referred Rule 6 of the Central Excise Valuation Rules. Rule 6 of the Central Excise Valuation Rules reads as follows:- "RULE 6.Where the excisable goods are sold in the circumstances specified in? clause (a) of sub section (1) of section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. [Provided that where price is not the sole consideration for sale of such excisable goods and they are sold by the assessee at a price less than manufacturing cost and profit, and no additional consideration is flowing directly o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he prices. Thus, no notional interest on the advance received shall be added to the transaction value.]" He argued that if the cylinders has capacity to manufacture 1000 pieces of finished goods and if it is used only to manufacture 200 pieces of finished goods then the cost of cylinder to be apportioned to each piece of the finished goods is to be calculated by spreading the total cost of cylinder to the maximum number of goods that it is capable of producing. Ld. Counsel referred in the decision of Tribunal in the case of Mutual Industries Ltd. Vs. Collector of Central Excise, Mumbai 2000 (117) 578 (Tribunal). He particular relied upon the Para 8 of this decision which reads as follows:- "8. Learned Counsel representing the appellant? advanced a further argument in the following terms. According to him, the maximum number of times during which the mould could be used has been found to be 2,50,000. When the same mould is used for the manufacture of components above 2,50,000 no value on account of the user of the mould can be added to the value of the finished product. In other words, according to learned Counsel, once the mould is utilised in the manufacture of maximum number o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty of Rs. 10,000/- has wrongly been imposed on the director. He argued that there is no specific violation of Rules has been pointed out and issue involved is that interpretation. 2.4 He further argued that there was no suppression of the part of the appellant and there was no intention to evade payment of duty. Therefore, extended period of limitation has been wrongly invoked. 3. The Ld. AR for the Revenue relied upon the impugned order, he particular relied on the following observations made in Para 6.9 of the impugned order. "I also find that the appellants in the appeal memo and at the time of filing reply to show cause notice have tried to creep in the contention that these payments are in respect of some of the cylinders which were not used. However as it appears from the letter dated 07.10.2005, produced by the director of the company during the recording of his statement dated 13.02.2006, it is crystal clear that the cylinders were in fact used for the manufacture of certain quantity of wrappers against which they had received certain amount s and the difference in the actual cost of the cylinders and the amount so recovered by the supply of wrappers was recovered by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore the cost was recovered from them. This being material cost has no relation with the sale of goods. (iii) Rs. 21,383-00: Debit Note No. DN/35/04-05 dated 17.08.2004. This amount represents the cost of the cylinders incurred by them due to change in production plan of VIM 400 gms. Raincoat wrappers. The cylinders was got manufactured for the buyer and production on this cylinder was stopped half way. Therefore, the differential amount on the cost of cylinder was recovered from them. This being material cost has not relation with the sale of goods." 6. From these facts, it is apparent that the buyer of the printed material is not supplying the cylinders to the appellant free of cost. It is the appellant who s purchasing the cylinders. In case the total quantity purchased by the buyer is later reduced by buyer for certain reasons, the balance cost of cylinder is being recovered by the appellant from the buyer as damages. Thus, it is not the case of the buyer supplying cylinders free of cost to the appellant but it is the case of appellant buying the cylinders themselves and recovering part of the cost of cylinders from the buyer as damages. In these circumstances, Rule 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.L.T. 333. The departmental representative s contention that these decisions were concerned with the liquidated damages whereas we are concerned with something other than this damages is clearly unacceptable. We quote below paragraph 4 of the decision in Bhartia Cutler Hammer Ltd. v. CCE in which the concept of liquidated damages is set out. "4. Section 73 of the Indian Contract Act provides for compensation for loss and damage caused by breach of contract. The party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arises in the usual course from such breach or which party knew, when making the contract, to be likely to result on breach. The parties may determine in advance, the amount of compensation to be paid on account of loss or damage caused by a breach of contract where the parties agree on a reasonable sum as compensation, it is regarded as liquidated damages which is a pre-estimate of the loss or damage on account of the breach of contract. Such a clause may be enforceable in law. Where the quantification is not reasonable but is intended to penalise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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