2011 (9) TMI 385 - AT - Central Excise

Tribunal rules notional interest on advances not assessable value, evidence crucial for pricing impact

The Tribunal dismissed the Revenue's appeal, upholding the decision that notional interest on advances need not be included in the assessable value of ... Assessable value - Valuation of excisable goods - Notional interest - Revenue contended that considerable amounts were taken as advances and the notional interest on those advances are to be included in the assessable value of the goods - the goods manufactured by the respondents are tailor-made and the respondents received certain advances - It would be necessary for the revenue to show that such advance has influenced in the lowering of the price and that it is not depicting the normal price of the goods - In the present, there is no evidence produced by the Revenue to show that the sale price was depressed by the advances taken - Decided in favour of assessee. Issues:1. Whether notional interest on advances received should be included in the assessable value of goods.Analysis:The case involved a dispute regarding the inclusion of notional interest on advances received in the assessable value of goods. The Revenue appealed against the order of the Commissioner (Appeals) which held that such notional interest should not be included. The Tribunal considered the argument presented by the Revenue that significant amounts were taken as advances, and therefore, the notional interest on those advances should form part of the assessable value of the goods.Upon examining the records, the Tribunal noted that the goods manufactured by the respondents were tailor-made, and advances were indeed received by them. Citing the decision of the Hon'ble Supreme Court in a previous case, it was highlighted that the mere fact of an interest-free advance by a buyer to the manufacturer does not automatically warrant the inclusion of notional interest in the assessable value. The Revenue needed to demonstrate that such advances influenced a reduction in the price and did not reflect the normal price of the goods. However, the Tribunal found no evidence presented by the Revenue to establish that the sale price was affected by the advances received.Furthermore, the Tribunal referred to a previous order where a batch of appeals filed by the Revenue was dismissed in line with the Supreme Court's decision on a similar matter. Given the lack of evidence indicating a price depression due to the advances, the Tribunal concluded that there was no flaw in the impugned order. Consequently, the appeal by the Revenue was dismissed, upholding the decision that notional interest on advances need not be included in the assessable value of the goods.This judgment provides clarity on the criteria for including notional interest on advances in the assessable value of goods, emphasizing the necessity for the Revenue to establish a direct impact on pricing. The decision underscores the importance of evidence in demonstrating any influence on pricing due to advances received, ensuring a fair and accurate determination of the assessable value in such cases.