Notional interest on security deposits is excluded from assessable value absent a real nexus with sale price.

Notional interest on interest-free security deposits and advance deposits collected from dealers and customers was not added to the assessable value of excisable goods because the deposits were disclosed, the sale price remained uniform, and there was no evidence that the deposits reduced the price or operated as additional consideration. The applicable principle was that notional interest is includible only where a real nexus is shown between the deposit and the sale price. On those facts, the deposits were treated as security for supply, not part of the price, and the duty demand based on notional interest failed.

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Issues: Whether notional interest on interest-free security deposits and advance deposits collected from dealers and customers was includible in the assessable value of excisable goods.

Analysis: The deposits were disclosed to the department and were found to be uniform in the sense that the goods were sold at the same price to dealers who had made deposits and to those who had not. There was no evidence that the deposits depressed the sale price or that the buyers who made no deposits were favoured buyers. On the facts, the deposits were treated as security for supply and not as an element of the price. The legal position applied was that notional interest can be added only where a real nexus is shown between the deposit and the sale price as additional consideration.

Conclusion: The notional interest on the deposits was not includible in the assessable value and the issue was answered in favour of the assessee.

Final Conclusion: The duty demands based on addition of notional interest could not be sustained, and the appeals succeeded with consequential relief.

Ratio Decidendi: Notional interest on customer or dealer deposits is includible in assessable value only when the deposits are shown to have a direct nexus with and to depress the sale price as additional consideration; absent such nexus, they do not form part of the assessable value.

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