Order date: 10 October 2022

Facts 

• The appellant, M/s. Crompton Greaves Ltd., are holders of central excise registration for manufacture of excisable goods falling under Chapters 72, 82, 84 & 85 of the first Schedule to the Central Excise Tariff Act.
• During the course of audit of the records of the appellant, it was observed that the appellant had sold scrap of stamping by auction. The appellant deducted amount proportionate to the quantity of scrap not lifted by the bidder from the money deposited as earnest money.
• A Show cause notice was issued demanding duty along with interest and penalty on such transaction. As the deduction from the security money made by the appellant from the money deposited by the bidder as earnest money is sought to be added to the bid value for determining the transaction value for payment of central excise duty. 

Issue

• Whether Earnest Money Deposit is to be added to the bid value for determining central excise duty?

Order

• The Tribunal observed that the reliance placed by the Revenue on the decision of Hon’ble Supreme Court in the case of TVS Motors Co. Ltd. [2016 (331) ELT 4 (SC)] para 11 is totally misplaced. It says that the sale of goods would not be made unless the buyer is also to pay an additional amount to the manufacturer, apart from the price of the goods.
• Further, in South Eastern Coalfields Ltd. [2021 (55) GSTL 549(Tri.-Del.)], it was held that it is not possible to sustain the view, forfeiture of earnest money deposit and liquidated damages have been received by the appellant towards “consideration” for “tolerating an act” leviable to service tax under Section 66E(e) of the Finance Act.”
• In the case of Victory Electricals Ltd. [2013 (298) ELT 534 (Tri.-LB)], it was held that 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 (in the agreement), stipulating variation in the price, on account of liability to “liquidated damages”, irrespective of whether the clause is titled “penalty” or “liquidated damages”, the resultant price would be the “transaction value”; and such value shall be liable to levy of excise duty, at the applicable rate.”
• Hence the impugned order is set aside and appeal allowed