Tribunal upholds duty demand on physician's samples, clarifies market value assessment

The Tribunal upheld the duty demand of Rs. 4,24,263 against the appellant, rejecting the additional 10% value on physician's samples. It ruled that physician's samples should be valued based on the price of commercially sold medicines, emphasizing that duty should be paid on the normal market value of goods, irrespective of whether they are sold or distributed for free. The decision clarified the assessment of duty on physician's samples, emphasizing the need to assess goods for duty based on their market value.

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Issues:
1. Duty payable on physician's samples - addition of 10% to the value of commercially sold medicines for assessing the value of physician's samples.

Analysis:
The appeal in question was against an Order-in-Original passed by the Commissioner of Central Excise, Delhi-III, related to duty demands arising from non-duty paid clandestine removal of medicines and non-payment of duty on physician's samples. The Tribunal's earlier order had finalized the issue of clandestine removal, leaving only the matter of duty on physician's samples for consideration in the present appeal.

The main dispute revolved around whether the Commissioner was justified in adding 10% to the value of commercially sold medicines to determine the assessable value of physician's samples. The appellant argued that physician's samples, distributed free to physicians, should be valued based on the price of sold medicines, as they are essentially the same product. Additionally, the appellant contended that no duty demand is warranted on freely distributed goods as their value is already included in the assessable value of sold goods.

The learned SDR, on the other hand, relied on precedents to assert that all removals of manufactured goods, regardless of the nature of supply, are subject to central excise duty as the duty is on manufacture, not sale. The Tribunal's decision in the case of Crosslands Research Lab. Ltd. and Bharat Heavy Electricals Ltd. supported this argument, emphasizing that the method of disposal of goods does not affect the liability to pay central excise duty.

Ultimately, the Tribunal upheld the impugned order, confirming the duty demand to the extent of Rs. 4,24,263. The Tribunal agreed that the further addition of 10% to the sale price of medicines was unwarranted, as freely supplied medicines should be assessed at the value of goods sold in the ordinary course of trade. Therefore, the appellants were required to pay duty based on the normal value of the medicines, as determined by the sale price of the same product.

In conclusion, the Tribunal's decision clarified the assessment of duty on physician's samples, highlighting the importance of valuing goods for duty purposes based on their normal value in the market, regardless of whether they are sold or distributed for free.

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