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of <h1>Notional interest on buyer's interest-free advances to manufacturer and whether it depresses transaction price for assessable value; rejected</h1> The dominant issue was whether notional interest on interest-free advances given by a buyer to a manufacturer is includible in the assessable value on the ... Notional interest on the advances - liable to be added in the assessable value of the goods - Whether the price is affected by the fact of interest free advance or remains uniform for all? Held that:- The main basis of adding the notional interest in assessable value of goods was on account of interest free loan which factor was responsible for determination of price between the parties namely, discount of 50% i.e. the price other than the normal price. There came to be two prices one for those who may not have advanced any interest free loan to the manufacturer and the other for Ponds (I) Limited which was a bulk purchaser to the extent of nearly 90% of the production for which purpose advance was also made available to the manufacturer without interest. The fact of interest free loan, has direct nexus with price fixation at a lower amount than the normal price. The mere fact of making an interest free advance by a buyer to the manufacturer, by itself will not be a sufficient ground to reload the assessable value with notional interest. 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 appeals, neither there is any evidence or proof on the record nor it is the case of the appellant on facts, that the interest free advance has influenced the price and the price lower than the normal price had been charged by the respondents. We do not think it necessary to deal with facts of each case separately since it is not in dispute that interest free advances were made by the buyers but at the same time it is also not in dispute that such advances had never influenced the price charged by the manufacturers from buyers. Appeal dismissed. Issues: Whether notional interest on interest-free advances received from buyers is includible in the assessable value of excisable goods for the period in question.Analysis: Section 4 of the Central Excise and Salt Act, 1944 and Rule 5 of the Central Excise (Valuation) Rules, 1975 require inclusion in value of any additional consideration flowing directly or indirectly from the buyer. Prior decisions and departmental guidance establish that notional interest on advances is includible only where the advance has influenced fixation of price (for example by resulting in a lower price or special discount to the buyer). The Board circular of 22-6-1998 and the later Rule 6 Explanation 2 (2003) illustrate the principle that mere receipt of interest-free advances is insufficient; revenue must produce evidence that such advances affected the price charged. In the present appeals the record contains no evidence that interest-free advances influenced the prices charged by the manufacturers or resulted in a lower than normal price; prices remained uniform and there is no proof of price reduction attributable to the advances.Conclusion: Notional interest on interest-free advances is not includible in the assessable value in the absence of evidence that such advances influenced fixation of the sale price; conclusion in favour of the assessee.
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