2006 (8) TMI 45 - AT - Central Excise

Central Excise Valuation Board circular no. 404/37/98-CX dt. 22.6.98 not applicable to valuation of tailor made goods Burden of proof is on Deptt. to determine any nexus between advance received from buyer of tailor made goods and price fixed by assessee Notional interest on advance not to be included in valuation of tailor made goods

Summary

Issues:
- Inclusion of notional interest on advances in the assessable value of goods sold.

Analysis:
1. The appeals were against orders by the appellate Commissioners regarding the inclusion of notional interest on advances received from buyers in the assessable value of goods sold. The appellate authorities had relied on previous rulings and circulars to support their decision. The Department contested this, arguing that for tailor-made goods where comparable prices are not available, it is challenging to establish a nexus between the advance and the price fixed by the assessee. The Department claimed that the circular used by the appellate authorities was not applicable to tailor-made goods. The Department referred to a Tribunal decision stating that if the burden of proving no nexus between advance and price was not discharged by the assessee, interest on advance should be included in the assessable value of goods.

2. The respondents argued that even for tailor-made goods, it was the Department's responsibility to determine the correct assessable value and establish any nexus between the advance and the price. They relied on previous Tribunal decisions to support their stance. The Tribunal examined both sides' submissions and previous decisions. It concluded that the burden of establishing a nexus between the price of goods and any advance paid by the buyer, for the inclusion of notional interest on advance in the assessable value, lies with the Department. The Tribunal emphasized that this burden cannot be shifted to the assessee solely based on the goods being tailor-made. It disagreed with the Department's argument and decided to follow the decisions cited by the respondents, stating that notional interest on advance should not be included in the assessable value of the goods.

3. In the final judgment, the Tribunal sustained the impugned orders and dismissed the appeals. The Tribunal held that the Department must establish the basis for including notional interest in the assessable value and cannot shift this burden to the assessee, even for tailor-made goods. The Tribunal criticized the decision cited by the Department, stating it did not consider previous Tribunal decisions and the relevant Board's circular. Ultimately, the Tribunal maintained that notional interest on advance received by the respondents should not be included in the assessable value of the goods in question.