Notional interest on customer advances is not added to excise value unless evidence shows it affected pricing or costing.

Notional interest on customer advances taken for tailor-made goods is includible in central excise value only where the Revenue proves by evidence that the advance or its benefit depressed the sale price or was otherwise reflected in costing. Mere reliance on the working-capital benefit of advances, or on a presumed saving of interest, is insufficient. On the facts stated, no material showed that the advances affected pricing or conferred a measurable benefit loaded into value, so the demand and penalty could not be sustained and the addition of notional interest was rejected.

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Issues: Whether notional interest on customer advances taken for manufacture of tailor-made goods was includible in the assessable value under central excise valuation principles.

Analysis: The advance was taken against specific orders for tailor-made cranes. The controlling principle, as applied in the cited precedents and departmental instructions, is that the Revenue must adduce evidence showing that the advance or its benefit was actually taken into account in fixing the sale price, or that the price stood depressed to that extent. Mere reliance on the fact that advances provide working capital, or on a presumed saving of interest, is not sufficient. In the present case, no evidence was produced to establish that the advances influenced the pricing of the goods or that any ascertainable benefit was obtained by the assessee which could be loaded to value.

Conclusion: Notional interest on customer advances was not includible in the assessable value, and the demand and penalty could not be sustained.

Final Conclusion: The appeal succeeded and the excise demand based on addition of notional interest on advances was set aside.

Ratio Decidendi: Notional interest on advances can be added to assessable value only if the Revenue proves, by evidence and costing, that the advance actually depressed the price or conferred a measurable benefit reflected in the price.

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