Order Date – 15 February 2023

Parties: Skoda Auto Volkswagen India Private Ltd Vs Commissioner of Central Excise Aurangabad

Facts – 

• The Appellant, Skoda Auto Volkswagen India Private Ltd, in addition to manufacture of their own models of cars, also undertook production of Volkswagen and Audi brand cars of specific models under the agreement valid for five years. Non fulfilment of contract will have penalty in the form of liquidated damages.
• The adjudicating authority held liquidated damages to be consideration for vehicles manufactured by the appellant and cleared to the dealers during the period from November 2007 to January 2012 and liable to duty along with penalty. Effectively the, central excise authorities sought to enhance value of the manufactured goods to the extent of liquidated damages.
• Being aggrieved the appellant had filed the appeal.

Issue –

• Whether liquidated damages to be considered on value of manufacture?

Order –

• The Tribunal held that 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.
• On perusal of ‘Rule 6 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. Therefore, in the event of rejection of the invoice value as the transaction value, it was not open to the adjudicating authority to re-determine value without recourse to Central Excise (Determination of Price of Excisable Goods) Rules, 2000.
• As the order is deficient in such finding, and more particularly as the show cause notice leading to the impugned order is also equally silent, the adjudicated demand and the fine and penalties flowing therefrom would not survive. Consequently, the impugned order is set aside and the appeal allowed.