TMI Blog2023 (10) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... ore on this ground alone the impugned order is liable to be set aside. Appeal allowed. - MR. C J MATHEW, MEMBER (TECHNICAL) AND MR. AJAY SHARMA, MEMBER (JUDICIAL) Shri Rajesh Ostwal, Advocate for the appellant Shri Sunil Kumar Katiyar, (AR) for the respondent ORDER This appeal has been filed assailing the impugned order dated 08.10.2013 passed by the Commissioner of Central Excise, Pune- I holding that the liquidated damages paid by M/s. Skoda Auto India Pvt. Ltd. to the appellant herein are not penalty but part of price of the cars already sold and in terms of Section 4(3)(d) of the Central Excise Act, 1944 the liquidated damages paid or payable would form the part of the price of the cars for the purpose of payment of duty and accordingly confirming the demand of Central Excise duty amounting to Rs.24,42,14,061/- on the amount recovered as Liquidated damages during the years 2009-10 to 2011-12 alongwith interest 2. The issue involved herein is whether the liquidated damages paid by 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the as per the agreement entered into between the appellant and M/s. SAIPL, the liquidated damages are not in the nature of penalty but part of price of the cars sold to M/s. SAIPL by the appellant, confirmed the demand of Central Excise Duty on the amount recovered as liquidated damages during the years 2009- 10 to 2011-12 alongwith interest and penalty and also appropriated the amount already paid by the appellant. The relevant findings recorded in the impugned order are reproduced as under:- 37. I therefore find that in the instant case, the manufacture and sale of Fabia cars is governed by the Supplemental Agreement. The clause relating to liquidated damages have been mentioned in Part B of he said agreement under the heading Price changes of vehicles to be sold by VWIPL to SAIPL. [Para 7(d) refers]. The said agreement provides for volumes and period of cars to be produced along with working of the price of the cars. It also mentions that the agreed upon volumes may exceed or reduce. The sale price of cars is determined on cost plus basis (material cost plus manufacturing cost plus profit). A fixed amount has been appropriated to the various elements of the manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore knew that in any situation, the agreed upon fixed cost is to be absorbed and recovered in the actual volumes lifted. Therefore, it is obvious that both the parties also knew that certain portion of agreed upon fixed cost would remain unrecovered if agreed upon quantity is not lifted and also that in such a situation, unabsorbed/ unrecovered portion of agreed upon cost is required to be paid by the end of calendar year. Hence, from the agreement, it is a clear cut case of recovery of estimated costs and not a recovery above costs so as to result in penalty. 40. I further find that the term Liquidated Damages has got nothing to do with penalty but is a part of the price of cars which is evident from the intention of parties in the Agreement as hereinunder:- (a) On reading of the agreements, it is clear that parties have nowhere agreed for non-production of contractual goods. There is provision to adjust the prices subsequently in different situation. However, this price adjustment mechanism cannot be construed that parties have agreed for nonproduction. The clause relating to Liquidated Damages in the contract cannot be red in isolation to conclude that the parties have ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rised Representative on behalf of Revenue and perused the case records including the written submissions/synopsis and case laws placed on record. Learned counsel for the appellant submits that the issue involved herein is settled in favour of the appellant as per the decision of the Tribunal in the matter of Skoda Auto Volkswagen India Pvt. Ltd. cs. CCE; 2023(2) TMI 658-CESTAT MUMBAI. We have gone through the said decision and found that identical issue i.e. liquidated damage has been dealt with therein. The relevant paragraphs of the decision (supra) are reproduced hereunder:- 5. Exposition of the Learned Senior Counsel for the appellant on the nature of the contract between the appellant and the buyers notwithstanding, we are constrained to note that the finding of the original authority is, without saying in so many words, based on transaction value in section 4(1) of Central Excise Act, 1944 not being truly reflected in the invoices and, therefore, to be enhanced to the extent of liquidated damages representing additional consideration. It is clear from section 4 of Central Excise Act, 1944 that several elements enumerated therein combine to designate such price as tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, 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. Explanation 2. - Where an assessee receives any advance payment from the buyer against delivery of any excisable goods, no notional interest on such advance shall be added to the value unless the Central Excise Officer has evidence to the effect that the advance received has influenced the fixation of the price of the goods by way of charging a lesser price from or by offering a special discount to the buyer who has made the advance deposit. Illustration 1. - X, an assessee, sells his goods to Y against full advance payment at Rs. 100 per piece. However, X also sells such goods to Z without any advance payment at the same price of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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