Notional interest on buyer advances is includible only when a real nexus with price suppression is proved.

Buyer advances or security deposits are includible as notional interest in assessable value only where the Revenue proves a real nexus with the price charged, or shows that the deposits depressed the sale price. Mere receipt of advances or deposits is not enough to enhance valuation. Comparable pricing with other buyers and the absence of evidence of any device to suppress price defeat inclusion of notional interest. Valuation cannot be increased on conjecture without proof of the required nexus, and connected demand and penalties cannot stand on that basis.

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Issues: Whether advances or security deposits received from buyers could be treated as additional consideration by way of notional interest and included in the assessable value, and whether the Revenue had proved any nexus between such deposits and depression of sale price.

Analysis: The goods were sold at comparable prices to other Meerut customers. No evidentiary basis supported the finding that the deposits were a device to depress price. The mere receipt of advances or security deposits did not, by itself, establish that notional interest was additional consideration for valuation purposes. The Revenue was required to prove a nexus between the deposits and the price charged, or to show that the deposits resulted in a lower sale price, but this burden was not discharged. The reasoning was held to be governed by the applicable principle that valuation cannot be enhanced on conjecture without proof of such nexus.

Conclusion: Notional interest from the advances/security deposits was not includible in the assessable value, and the valuation demand and connected penalties could not survive.

Final Conclusion: The appeals were allowed and the valuation-based demand was set aside.

Ratio Decidendi: Notional interest on buyer advances or security deposits is includible in assessable value only where the Revenue proves a real nexus between the deposits and the price charged, or shows that the deposits depressed the sale price.

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