IMPORTANT POINT
Notional interest on the advances taken by the assessees from the buyers is liable to be added in the assessable value of the goods when the interest free advance has influenced the price and the price lower than the normal price had been charged.

JUDGMENT

Brijesh Kumar, J.-All the above noted appeals have been preferred by the Revenue under Section 35 L (b) of the Central Excise and Salt Act, 1944 (for short the Act ) against the orders passed by the Customs, Excise and Gold (Control) Appellate Tribunal (for short CEGAT ), allowing the appeals of the assessees and holding that notional interest on the advances taken by the assesses, from the buyers is not liable to be added in the assessable value of the goods. With minor variations in the facts of each case, the main question involved in all these appeals is the same viz. the notional interest is liable to be included or not in the assessable value of goods. This question has been differently framed in different appeals but crux of the matter for consideration remains the same, hence all these appeals have been heard together and they are being disposed of by one common order. In Appeal No.410 of 2000, it was also indicated on behalf of the respondent that major part of the demand had become time barred. If necessary, we would advert to that question. No other question, in any appeal has been raised or pressed before us by either party.

2. For the sake of convenience, we refer to the documents on the record of the Civil Appeals Nos. 2884-2892 of 1999, Commissioner of Central Excise vs. M/s. ISPL Industries Ltd. The show cause cum demand notice dated 3.7.1995 is a long notice calling upon to show cause in respect of different matters under the Central Excise Act, besides one relating to inclusion of the notional interest in the assessable value, on the interest free advances taken by the assessees from customers. It reads as under :-

"Whereas it appears that M/s. ISPL Industries Limited, Kolshet ...........

(1) They have not included the interest accrued on the advance received from the customers in the assessable value on the goods cleared during the period from Jan.95 to Mar (details shown in the Annexure enclosed in the SCN).

The interest payable/paid in the advance made by the customers includible in the assessable value because the assessee would have incurred the expenditure for the said interest had they borrowed taken loans from Banks. The advance are similar to bank loans or money borrowed from banks and hence the interest on said advances is includable in the assessable value in view of Section 4 of the C.Ex. and Salt Act 1944 read with rule 5 of C.Ex. valuation rules 1975 and charged approximate C.Ex. duty, which they have failed to do at the time of clearance of excisable goods (details given in the Annexure to this show cause notice).

(1) ........................

(2) .......................

Now therefore the assessee are hereby required to show cause to the Dy. Commissioner, C.Ex. Bombay-III having his office at 4th floor, Navprabhat Chambers, Ranade Road, Dadar, Bombay -- 28 to why :

(a) The interest accrued on the advances received from their customers should not be included in the assessable value, the interest being calculated at the rate of 18% (Normal Bank rate of interest) from the date of receipt of advances/deposits till the date of final dispatch of material and

xxx xxx xxx

Superintendent C. Ex.

Range IV Div. Thane III"

3. As it would be evident, the main plank of the demand is that the advances taken from their customers are similar to bank loans or money borrowed from banks on which interest would normally be payable by the assessee, hence the interest on such advances is liable to be included in the assessable value as per the provisions under Section 4 of the Central Excise & Salt Act, 1944 read with Rule 5 of the Central Excise (Valuation) Rules, 1975.

4. The assessing authorities and the appellate authority did not accept the explanations of the assessees and added the notional interest accrued on advances made to the manufacturers, in the assessable value. The CEGAT, however, set aside those orders holdin