Physician's sample valuation excludes double addition of special packing cost when regular-pack price already reflects it.

Physician's samples of medicaments valued on a pro rata basis by reference to identical regular packs do not require separate addition of special packing cost where that cost is already embedded in the benchmark price. The Drugs Price Control Order, 1995 was held inapplicable to exclude packing cost from excisable valuation because it governs retail sale pricing, not the valuation method for physician's samples. Since advertising-related cost is absorbed in the regular-pack price used for comparison, the cost of catch covers or catch boxes cannot be added again merely because Modvat credit was taken on the packing materials.

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Issues: Whether the cost of special packing used for physician's samples of medicaments was required to be included separately in the assessable value of the samples cleared to physicians.

Analysis: The assessable value of the physician's samples had been determined on a pro rata basis by reference to the value of identical products sold during the same period, without separately adding the cost of the catch cover or catch box. The plea based on the Drugs Price Control Order, 1995 was rejected because that framework applied to retail sale of medicaments and did not support exclusion of packing cost from excisable valuation. The valuation issue was held to be governed by the settled principle that physician's samples are meant for advertising, and the cost of such advertising is absorbed in the price of the regular packs used as the benchmark for pro rata valuation. Since the cost of special packing was already reflected in the cost of the regular pack, it could not be added again as a separate element merely because Modvat credit had been taken on the packing materials.

Conclusion: The demand of differential duty was not sustainable, and the appeal succeeded in favour of the assessee.

Ratio Decidendi: Where physician's samples are valued pro rata with reference to identical regular packs, the cost of special packing already embedded in the regular-pack price cannot be separately added again to the assessable value.

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