Physician sample valuation follows the circular in force at the relevant time; later valuation circulars do not apply retrospectively.

Physician sample packs distributed free of cost were to be valued under the circular in force during the relevant period, which prescribed valuation at about 115% of cost of production or manufacture. The assessee followed that method for February 2003 to January 2004, and the valuation was treated as correct for that period. A later circular dated 25.04.2005, which directed valuation of free samples under Rule 4 of the Central Excise Valuation Rules, was held to operate only prospectively and not to govern the earlier period. The valuation dispute therefore remained in favour of the assessee, and the Revenue's challenge failed.

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Issues: (i) Whether physician sample packs distributed free of cost were correctly valued at 115% of the cost of production during the relevant period; (ii) whether the later circular dated 25.04.2005 could be applied retrospectively to the earlier period.

Issue (i): Whether physician sample packs distributed free of cost were correctly valued at 115% of the cost of production during the relevant period.

Analysis: The relevant period was February 2003 to January 2004, when Circular No. 634/34/2002-CX dated 01.07.2002 was in force. That circular prescribed valuation of physician samples at about 115% of the cost of production or manufacture. The assessee adopted that method and paid duty accordingly.

Conclusion: The valuation adopted by the assessee was correct and was in accordance with the operative circular for the relevant period.

Issue (ii): Whether the later circular dated 25.04.2005 could be applied retrospectively to the earlier period.

Analysis: The later circular directing valuation of free samples under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 was issued after the relevant period. The binding circular in force during the material time governed the valuation, and the later circular was held to operate only prospectively.

Conclusion: The circular dated 25.04.2005 did not have retrospective effect and could not govern the disputed period.

Final Conclusion: The valuation dispute was resolved in favour of the assessee, and the Revenue's challenge to the Commissioner (Appeals) failed.

Ratio Decidendi: For valuation of physician samples, the circular operative during the relevant period governs, and a subsequent circular altering the valuation method does not apply retrospectively unless expressly so provided.

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