Notional interest on buyer advances is includible only if the Revenue proves price suppression; extended limitation needs suppression of facts.

Notional interest on buyer advances can be added to assessable value for central excise only where the Revenue proves that the advances influenced and depressed the sale price, so the charged price was not the normal price. On the facts noted, the Department already knew of the advances and the contractual arrangement, and similar proceedings had earlier been dropped; in that setting, suppression of facts was not established. The extended period of limitation therefore could not be invoked, and the demand based on notional interest failed both on merits and on limitation.

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Issues: (i) Whether notional interest on advances received from the buyer was includible in the assessable value for central excise purposes and whether the extended period of limitation could be invoked on that basis; (ii) whether the Revenue had proved suppression of facts so as to justify the demand under the extended limitation period.

Issue (i): Whether notional interest on advances received from the buyer was includible in the assessable value for central excise purposes and whether the extended period of limitation could be invoked on that basis?

Analysis: The demand on advances could not be sustained merely because advances were received. In order to add notional interest to the assessable value, the Revenue had to establish that the advance had influenced the lowering of the price and that the price charged was not the normal price. The record showed that the Department had earlier been aware of the advances and had itself dropped similar proceedings. In the absence of proof that the advances depressed the price, the legal basis for loading notional interest into value was absent.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Issue (ii): Whether the Revenue had proved suppression of facts so as to justify the demand under the extended limitation period?

Analysis: The material on record showed prior departmental knowledge of the advances and the contractual arrangement, including earlier proceedings on the same issue. Since the relevant facts were already within the Department's knowledge, suppression could not be inferred. The precondition for invoking the extended period was therefore not satisfied.

Conclusion: The extended period of limitation was held to be inapplicable and the issue was decided in favour of the assessee.

Final Conclusion: The demand based on notional interest on advances failed on merits and the invocation of the extended limitation period was unsustainable, leaving the Revenue without a valid basis for the impugned demand.

Ratio Decidendi: Notional interest on buyer's advances can be added to assessable value only when the Revenue proves that the advances depressed the price, and extended limitation cannot be invoked without suppression of facts.

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