Physician samples remain excisable despite sale prohibition, and valuation must be made on a pro-rata basis.

Physician samples of patent and proprietary medicines remain excisable goods even though their sale is prohibited under the drugs law, because excise is levied on manufacture and marketability, not on sale. The sale restriction and overprinting requirement do not alter their character as goods for central excise purposes, so the objection to excisability fails. For valuation, physician samples are to be assessed on a pro-rata basis for the relevant period, and the alternative basis adopted by the lower authorities cannot stand. The connected matters are disposed of on that footing.

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Issues: (i) Whether physician samples of patent and proprietary medicines are excisable goods notwithstanding the statutory prohibition on their sale under the drugs law. (ii) If excisable, what is the correct method of valuation for physician samples for the purpose of central excise duty.

Issue (i): Whether physician samples of patent and proprietary medicines are excisable goods notwithstanding the statutory prohibition on their sale under the drugs law.

Analysis: Excise duty is attracted on manufacture and not on sale, and the levy under the central excise law is concerned with goods that are manufactured and marketable. The statutory restrictions under the drugs law regulate the quality and distribution of drugs and do not control the fiscal charge under the excise law. The prohibition on sale of physician samples and the requirement to overprint them as not to be sold do not destroy their character as goods for excise purposes. The samples are manufactured for distribution as a marketing tool and remain capable of excise levy notwithstanding the sale restriction.

Conclusion: Physician samples are excisable goods and the objection based on statutory prohibition of sale fails.

Issue (ii): If excisable, what is the correct method of valuation for physician samples for the purpose of central excise duty.

Analysis: The Court followed its earlier view that physician samples are to be valued on a pro-rata basis for the relevant period. The valuation adopted by the lower authorities on a different basis could not be sustained. The correct approach is to assess the samples on pro-rata basis in line with the applicable excise valuation principles.

Conclusion: Physician samples are to be valued on pro-rata basis for the relevant period.

Final Conclusion: The challenge to excisability fails, while the valuation issue is settled in favour of pro-rata assessment, and the connected matters are disposed of accordingly.

Ratio Decidendi: Statutory restrictions on sale under a different regulatory regime do not negate excisability where the goods are manufactured and otherwise capable of marketability for excise purposes, and physician samples are to be valued on pro-rata basis for the relevant period.

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