2013 (12) TMI 452 - AT - Central Excise

Ground Rent includible in the assessable value or not Amount recovered for period of delay Held that - The amount being charged as ground rent is for delay in making the payment by the buyers for the goods sold to them - This delay is counted from the date of order - The customer is expected to make the payment for the goods purchased by him within the period of 28 days from the date of sale order and if there is delay in making payment beyond 28 days, amounts at the rates varying from 0.5% of the sale price to 3.25% of the sale price are payable depending upon the period of delay there is no basis for the Department s plea that the ground rent is the storages charges for the period of delay in lifting of the goods by the customers - the ground rent is nothing but interest on receivables which is not includible in the assessable value Following Union of India Vs. MRF Ltd. 1995 (5) TMI 28 - SUPREME COURT OF INDIA Decided against Revenue.

Summary

Issues:
Interpretation of 'ground rent' in the context of assessable value for Central Excise duty.

Analysis:
The Respondent, engaged in manufacturing iron and steel products, sold defective/rejected materials through a tendering process, with a provision for 'ground rent' in case of delayed payment. The Department contended that the 'ground rent' should be included in the assessable value for Central Excise duty. A Show Cause Notice was issued, leading to a duty demand, interest, and penalty. The Additional Commissioner upheld the demand, but the Commissioner (Appeals) set it aside, citing the Apex Court's judgment in Union of India Vs. Bombay Tyres. The Revenue appealed against this decision.

The Department argued that 'ground rent' was akin to storage charges and should be included in the assessable value, referring to the Apex Court's judgment in Bombay Tyres International Ltd. The Respondent countered, stating that 'ground rent' was merely for delayed payment and should not be included.

Upon review, the Tribunal found that 'ground rent' was indeed for delayed payment, not storage charges. Citing the terms and conditions of the sale agreement, the Tribunal concluded that the amount was interest on receivables, following the precedent set by the Apex Court in Union of India Vs. MRF Ltd. Therefore, the 'ground rent' was deemed not includible in the assessable value for Central Excise duty.

The Tribunal dismissed the Revenue's appeal and disposed of the cross objection, upholding the Commissioner (Appeals) decision.