Notional interest on buyer advances excluded from assessable value absent proof of nexus with price

Notional interest on advances received from buyers was not includible in the assessable value of tailor-made goods unless the Department first established a nexus between the advance and the price of the goods. The fact that the goods were manufactured to customer specifications did not, by itself, shift the burden of proof to the assessee. Valuation remained the Department's responsibility, and the Tribunal treated the contrary decision as per incuriam for failing to consider its earlier consistent view and Board Circular No. 404/37/98-CX dated 22 June 1998.

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Issues: Whether notional interest on advances received from buyers was includible in the assessable value of tailor-made goods, and whether the burden to establish a nexus between the advance and the price shifted to the assessee merely because the goods were manufactured to customer specifications.

Analysis: Valuation is primarily the Department's function, and there was no valid basis to shift the burden to the assessee on the ground that the goods were tailor-made. The Department was required to establish a nexus between the price of the goods and any advance received from the buyer before notional interest on such advance could be added to the assessable value. The decision relied on by the Department was held to be per incuriam for not considering the earlier consistent view of the Tribunal and the Board's Circular No. 404/37/98-CX. dated 22.6.98.

Conclusion: Notional interest on advances was not includible in the assessable value, and the burden remained on the Department to prove nexus.

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