Notional interest on customer advances can enter assessable value when lower pricing already reflects that benefit.

Notional interest arising from customer advances for tailor-made goods was includible in assessable value under central excise law where the assessee admitted that the interest benefit was factored into a lower sale price. That admission was sufficient to show that the price was influenced by additional consideration, so no further proof of nexus was required from the department. The argument that the interest was effectively neutralised by reducing the price failed because valuation had to reflect the full realizable price unaffected by such benefit. The demand was sustained, and the valuation, penalty and duty order were restored.

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Issues: Whether notional interest accruing on advances received from customers for tailor-made goods is includible in the assessable value for central excise duty, where the assessee admits that such interest was taken into account while fixing a lower sale price.

Analysis: The assessee admitted that the interest element derivable from customer advances was considered while fixing the sale price and that the price was reduced accordingly. On that admission, the price stood influenced by the advance-related interest and no further proof of nexus was required from the department. The contention that the interest was notionally returned by lowering the price did not assist the assessee, because the proper assessable value had to reflect the full realizable price unaffected by such interest element. Once the price itself was fixed after factoring in the benefit of advances, the resulting reduction constituted an element of cost and an additional consideration affecting valuation under the excise law.

Conclusion: Notional interest on the advances was rightly included in the assessable value and duty demand was sustainable; the assessee's challenge failed.

Final Conclusion: The valuation adopted by the assessee was held to be affected by the interest benefit arising from customer advances, and the original demand and penalty order were restored.

Ratio Decidendi: Where an assessee admits that customer advances and the interest benefit arising from them are taken into account to fix a lower sale price, the price is treated as influenced by additional consideration and the notional interest is includible in assessable value.

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