Notional interest on customer advances not includible in assessable value absent proof of price depression.

Notional interest on customer advances for tailor-made electrical machinery is includible in assessable value only if the department proves, with evidence, that the advance depressed the price of the final product or was otherwise factored into the selling price. Here, no such evidence was produced, and the advances were taken as a precaution against possible cancellation under the contract terms. The notional interest was therefore held not includible in the assessable value, and the impugned order was set aside in favour of the assessee.

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Issues: Whether notional interest on advances received from customers was includible in the assessable value of tailor-made electrical machinery and equipment.

Analysis: The Tribunal applied the settled principle that notional interest on customer advances can be added to the assessable value only when the department establishes, by evidence, that the advance had depressed the price of the final product or was otherwise taken into account in fixing the selling price. On the facts, the department produced no evidence to show any effect on the selling price. The advances were taken as a precaution against possible cancellation of orders for tailor-made goods under the contract terms.

Conclusion: The notional interest on the advances was not includible in the assessable value, and the impugned order was set aside in favour of the assessee.

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