Notional interest on buyer advances excluded from assessable value absent price influence; excise demand and penalties failed.

Notional interest on advances received from buyers was held not includible in assessable value for central excise where the advances formed part payment of price and there was no finding that they had any nexus with, or influence on, the sale price. In the absence of such price influence or other supporting basis, the duty demand could not be sustained. The Tribunal also preferred the later High Court view applying the same principle, and the demand and penalties were consequently held unsustainable.

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Issues: Whether notional interest on advances received from buyers was includible in the assessable value for central excise duty and whether the consequent demand and penalties were sustainable.

Analysis: The Tribunal applied the earlier view that where advances are taken as part payment of the price from all buyers and there is no finding that the advance had any nexus with the sale price so as to inflate assessable value, notional interest on such advances cannot be added to the assessable value. The impugned order was not supported by any finding of price influence or other basis to sustain the duty demand. The Tribunal also preferred the later High Court view following the same principle.

Conclusion: The demand and penalties were not sustainable and the appeals succeeded.

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