Role of notional interest on the advances/deposits taken by the manufacturer from the buyer in influencing the assessable value:

Interest on advance deposits is includible in the assessable value only if there is a nexus between the advance deposit and the sale price. The ratio decided in the Metal Box case – 1995 (75) ELT 449(SC) requires, before adding notional interest, establishment of the facts that the interest free advance reflected favoured or special treatment and that advances had the effect of pegging down the wholesale price. If the assessee charges the same price from those who give advances and those who do not, the question of including notional interest on advances does not arise – VST Industries Ltd vs CCE 1998 (97) ELT 395 (SC).