Notional interest on buyer advances is includible only when it depresses the sale price and affects valuation.

Notional interest on buyer advances or interest-free loans is includible in assessable value only if the revenue proves that the financial arrangement actually influenced and depressed the sale price. The analysis notes that comparable prices for similar goods sold to the same buyer by other manufacturers, and by the assessee to another buyer, undermined the allegation of value suppression. As the revenue did not discharge the burden of showing additional consideration, the demand and penalties could not be sustained.

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Issues: Whether notional interest on advances or loans received from the buyer was includible in the assessable value of the goods as additional consideration.

Analysis: The demand proceeded on the footing that advances received from the buyer yielded a notional interest advantage to the assessee and that such advantage represented additional consideration for the goods. The appellate authority found that the revenue had not established that the advances or loans actually depressed the sale price of the goods supplied to that buyer. It was noted that comparable prices existed for similar goods sold to the same buyer by other manufacturers and also for similar goods sold by the assessee to another buyer, which negatived the allegation of value suppression. The applicability of the valuation rule required proof that the financial arrangement had affected the price charged, and that burden was not discharged. Since the case was decided on merits in favour of the assessee, the plea on limitation was not examined.

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

Ratio Decidendi: Money value of an advance or interest-free loan can be added to assessable value only when the revenue proves that it has in fact influenced and depressed the sale price of the goods.

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