ORDER
P.G. Chacko, Member (J)
1. These appeals are against orders passed by the appellate Commissioners holding that notional interest on advances received from buyers did not form part of the assessable value of the goods sold to them by the assessees. The appellate authorities, in the impugned orders, relied on the apex Court’s ruling in VST Industries Limited v. CCE, Hyderabad 1998 (97) ELT 395 (SC) and a few decisions of the Tribunal as also the Board’s Circular No. 404/37/98-CX dated 22.6.98 and held that, where no nexus was established between the advance received from buyer and the price fixed by the assessee, any notional interest on such advance was not to be added to the assessable value of the goods. It was found by the authorities that the Department had not brought forth any evidence to establish such a nexus. This view of the appellate Commissioners is sought to be contested by the Department in the present appeals, wherein it is submitted that, where the goods under valuation are tailor-made goods, comparable prices are not available and hence it is not possible for the department to prove nexus as above. It is stated that the above Board’s circular is not applicable to valuation of tailor-made goods. Ld. SDR reiterates these averments and relies on the Tribunal’s decision in the case of CCE, v. Hafa Hoists and Cranes , wherein it was held that, where the goods under valuation were manufactured as per specifications of Customers, the burden to prove that any advance received by the manufacturer from customer had no nexus with the price charged was upon assessee and that, when such burden was not discharged by him, interest on advance was liable to be included in the assessable value of the goods. On the other hand, ld. Counsel for the respondents submits that, even in the case of tailor-made goods, it was the function of the Department to determine its correct assessable value, and, therefore, it is their burden to establish any nexus between the advance and the price. In this connection, reliance is placed on the following decisions of the Tribunal,-
i. Moosa Hajee Patrawala v. CCE, Mumbai 2001 (138) ELT 290 (Tri. Mum)
ii. Electro Pneumatics & Hydraulics (I) Ltd. v. CCE
2. In both the cited cases, the earlier decision in Grasim Industries Limited v. CCE was followed and, accordingly, it was held that it was the Department’s burden to show that there was nexus between the price of goods and any advance paid by the buyer so that notional interest on such advance could be included in the assessable value of the goods even where the goods were tailor-made.
3. After considering the submissions made by both sides and the decisions cited by them, we find that as valuation is, basically, the Department’s function, there is no valid reason to shift this burden to the assessee depending on whether the goods are tailor-made or not. We are, therefore, of the view that, in the case of tailor-made goods, the burden is still on the Department to show that there is nexus between its price and any advance received from the buyer. Establishment of such nexus is a pre-requisite for inclusion of notional interest on advance in the assessable value. Where the Department proposes to include such interest in the assessable value, it is for them to establish the basis for such inclusion. This burden cannot be shifted to the assessee by mere reason of the goods being tailor-made. We, therefore, are inclined to follow the decisions cited by ld. Counsel and to hold that notional interest on advance received by the respondents was not to be included in the assessable value of the goods in question. In our view, the decision cited by ld. SDR is per incuriam inasmuch as it did not take into account the view consistently taken by the Tribunal in its earlier decisions and also did not take into consideration the Board’s Circular No. 404/37/98-CX dated 22.6.98.
4. In the result, the impugned orders are sustained and these appeals are dismissed.
(Order dictated and pronounced in open Court)