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CX - Sec 4 - Applicant, a job worker, receiving compensation on termination of contract with principal - since applicant were paying duty at same price at which principal was selling goods, it cannot be said that termination proceeds is an additional consideration - Stay granted: CESTAT

By TIOL News Service

MUMBAI, JAN 09, 2013: THE applicant is undertaking job-work of M/s Dystar India Pvt. Ltd. So as not to have any problems on the valuation front, the applicant was paying duty at the same price at which M/s Dystar India was selling the goods.

But if you are destined to receive a demand, you will receive one. Upon termination of the contract the applicant received an amount of Rs.2.20 Crores from M/s Dystar India.

Revenue was of the opinion that this termination proceeds is a new modus operandi of undervaluing the goods - So, a demand was raised alleging that this amount is an "additional consideration" and the same has to be included in the assessable value of the goods cleared.

Both the lower authorities confirmed the central excise duty demand of Rs.35.90 lakhs along with imposition of penalty and interest.

Before the CESTAT, the applicant submitted that the agreement was entered in the year 1997 for the period 1997-2002 and as per the terms of the agreement, in case of prior termination of the contract, the applicant is entitled for certain compensation. It was, therefore, submitted that since they were paying duty at the price at which M/s Dystar India was selling the goods in the market, there is no ground to add the ‘termination compensation' to the assessable value of the goods.

The Revenue representative reiterated the findings of the lower authority.

The Bench observed -

"6. In view of the fact that the applicants were paying duty at the sale price of the principal, therefore, we find merit in the contention of the applicant that the amount in question is not an additional consideration. Therefore, pre-deposit of the dues are waived and recovery thereof stayed."

In fine, the Stay petition was allowed.

(See 2013-TIOL-52 -CESTAT-MUM)


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