Notional interest on customer advances is excluded from assessable value unless the advance is shown to have lowered the sale price.

Notional interest on advances received from customers is not automatically added to assessable value under the central excise valuation rules. The valuation scheme permits inclusion only of additional consideration having a legally relevant nexus with the sale price, and interest-free advances by themselves do not constitute such consideration. The later clarification in Explanation 2 to Rule 6 confirms exclusion unless the Revenue proves that the advance influenced fixation of a lower price or a special discount. The governing principle is that no presumption arises from the mere existence of an advance; price influence must be established by evidence.

---

---

Issues: Whether notional interest accruing on advances received from customers is includible in the assessable value of goods under the central excise valuation regime.

Analysis: The valuation scheme under Rule 6 of the Central Excise Valuation Rules, 2000 permits addition only of additional consideration having a legally relevant nexus with the sale price. Notional interest on advances is not an amount paid by the buyer to the assessee or on its behalf in connection with the sale, and therefore does not form part of transaction value merely because advances may have facilitated the manufacturer's financing. The later clarification in Explanation 2 to Rule 6, inserted by Notification No. 11/2003-C.E. (N.T.) dated 01.03.2003, confirms that such notional interest is excluded unless the Revenue establishes by evidence that the advance influenced fixation of a lower price or special discount. The governing principle remains that no presumption can be drawn from the mere existence of an interest-free advance; proof of price influence is required.

Conclusion: Notional interest on customer advances is not automatically includible in assessable value, and in the absence of evidence that the advances depressed the price, the demand was unsustainable.

Ratio Decidendi: Notional interest on advances received from buyers is includible in assessable value only if the Revenue proves that the advance influenced fixation of a lower sale price or special discount; mere receipt of an interest-free advance is insufficient.

---