9911796707
TMI Blog2023 (10) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... y M/s. Skoda Auto India Pvt. Ltd. (in short "SAIPL") to M/s. Volkswagen India Pvt. Ltd. (in short "VWIPL") are part of the price of cars sold by M/s. VWIPL to M/s. SAIPL and liable to be included in the transaction value of the cars for the purpose of payment of duty? 3. The facts leading to the filing of the instant appeal are stated in brief as follows. The appellant herein i.e. M/s. VWIPL is engaged in manufacturing of cars bearing the brand name Volkswagen Vento and Volkswagen Polo. They also manufactured Skoda Fabia brand cars on contract manufacturing basis, on the basis of orders placed by M/s. SAIPL and sell those cars exclusively to them. On the basis of intelligence that the appellants were collecting additional amount from M/s. SAIPL under the guise of liquidated damages over & above the value but not paying any central excise duty on it, investigation was initiated. During investigation, the appellant had discharged the duty liability of Rs.24,42,14,061/- on the amount of Rs.2,13,05,28,150/- received by them as liquidated damages from M/s. SAIPL for the cars manufactured and cleared by them during the period 2009 to 2011. 4. After conclusion of investigation, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s determined on cost plus basis (material cost plus manufacturing cost plus profit). A fixed amount has been appropriated to the various elements of the manufacturing cost i.e. Direct labour, Indirect labour Overheads, depreciation and financing in the price of the car on the basis of planned volumes. The manufacturing cost is not the actual cost but is an agreed upon amount based on the planned volumes. In terms of Supplemental Agreement, during the period of contract M/s VWIPL, on manufacture and sale of cars should recover the material cost and the agree d upon manufacturing cost in respect of the planned volumes. In case of actual volumes being lesser than the planned volumes in the calendar year, the agreed upon manufacturing cost would not be realized. In such circumstances, M/s VWIPL is recovering the remaining amount of manufacturing costs in two categories i.e. (i) the fixed cost and (ii) the variable cost and the liquidated damages is worked out on the basis of difference between the planned volumes and the sold volumes multiplied with the fixed costs quantum attributable to the car. The fixed cost per car is an agreed upon amount and is part of the agreed upon manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have agreed for nonproduction. The clause relating to Liquidated Damages in the contract cannot be red in isolation to conclude that the parties have agreed for a compensation for non-production. In fact, this clause is incidental to main contract for supply of goods. (b) The Supplemental Agreement itself states that M/s VWIPL and M/s SAIPL shall prepare the Planning Round and Forecast plans for production and sale of cars, and due to short or excess orders by M/s SAIPL, the Annual production volumes may vary from the yearly production plan given in Annexure-C. (c) Parties have agreed for agreed upon cost plus price. Parties know in advance that the agreed upon fixed costs are always recoverable irrespective of volume. And this recovery may be through transfer price arrived at the beginning on the basis of estimated volumes or even through liquidated damages at the end of agreed period, if agreed quantity is not lifted. (d) The contract deals with certain situations relating to adjustments in prices in certain situations. Recovery of liquidated damages for non-lifting of agreed quantity is one of the same. Parties have themselves placed and agreed for a clause relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration. It is clear from section 4 of Central Excise Act, 1944 that several elements enumerated therein combine to designate such price as 'transaction value' on which appropriate rate of duty would, in accordance with section 3 of Central Excise Act, 1944, apply. These are the price to be the sole consideration for sale of goods sold by the manufacturer for delivery at the time and place of removal and to the extent that the assessee and the buyer are not related each other. There is no finding in the impugned order, or unearthing by investigation, that the details of the contract so designated as 'liquidated damages', contingent upon inability of the dealers of the buyers to book the prescribed number of vehicles, for remitting additional consideration. It is clear from section 4 of Central Excise Act, 1944 that any deviation from any of the elements enumerated therein would require treatment prescribed in Central Excise (Determination of Price of Excisable Goods) Rules, 2000. These several rules commence with the declaration that there is no option for determination of value other than by recourse to in Central Excise (Determination of Price of Excisable Goods) Rules, 2000. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce payment at Rs. 100 per piece. However, X also sells such goods to Z without any advance payment at the same price of Rs. 100 per piece. No notional interest on the advance received by X is includible in the transaction value. Illustration 2. - A, an assessee, manufactures and supplies certain goods as per design and specification furnished by B at a price of Rs. 10 lakhs. A takes 50% of the price as advance against these goods and there is no sale of such goods to any other buyer. There is no evidence available with the Central Excise Officer that the notional interest on such advance has resulted in lowering of the prices. Thus, no notional interest on the advance received shall be added to the transaction value.' it is evident that, in the absence of any finding thereof, it would not be appropriate for such value to be loaded on the vehicles already produced. 6. In addition, the residuary provision of 'Rule 11. If the value of any excisable goods cannot be determined under the foregoing rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of section 4 of the Act.' in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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