Notional interest on customer advances is excluded from excise value absent proof that the deposit depressed the goods' price.

Notional interest on advances or security deposits collected from customers for tailor-made goods is not includible in the assessable value for central excise unless there is evidence that the deposit gave the manufacturer a direct or indirect benefit and depressed the price of the goods. A mere assumption that the buyer's advance would necessarily be reflected in pricing is insufficient. In the absence of proof that the advance affected valuation, inclusion of notional interest is not justified.

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Issues: Whether notional interest on advances/security deposits received from customers for tailor-made goods forms part of the assessable value for central excise purposes.

Analysis: The advance was collected as security against possible cancellation and there was no material to show that the manufacturer derived any benefit from the deposit or that the price of the goods was depressed on account of the advance. The Board circular and the cited authorities make inclusion of notional interest dependent on evidence that the advance conferred direct or indirect advantage and affected valuation. A mere assumption that a buyer would not pay advance unless an equivalent amount was adjusted in price was unsupported by evidence.

Conclusion: Notional interest on the advance could not be included in the assessable value in the absence of proof that the advance depressed the value of the goods.

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