2012 (7) TMI 32 - AT - Central Excise

Valuation of Physician Samples Cleared on Payment of Central Excise Duty

Allianz Bio Sciences Pvt. Ltd. & Others Versus Commissioner Central Excise, Puducherry

The Appellate Tribunal CESTAT, Chennai, ruled that physician samples manufactured on job work basis and cleared on payment of Central Excise duty should ... Valuation of physician samples manufactured under contract on job work basis – Revenue stand that such samples are being cleared by the appellants on payment of Central Excise duty in terms of the provisions of Section 4 – Assessee contested the assessable value is to be arrived at on the basis of such transaction values – Held that:- The case of Themis Laboratories Pvt. Ltd. and Meghdoot Chemicals Ltd. Vs CCE Mumbai [2011 (2) TMI 713 (Tri)] decided that where physician samples are not distributed free of cost by the manufacturer, but are cleared on receipt of consideration, the excise duty is required to be paid on the transaction value – as physician samples manufactured and cleared to brand owners/ buyers on principal to principal basis for a consideration, further distributed free of cost to physicians/doctors, the same is required to be assessed to duty on the transaction values – in favour of assessee. Valuation of physician samples manufactured and cleared as free samples - Held that:- As decided in Cadila Pharmaceuticals Ltd. Vs CCE Ahmedabad [2008 (9) TMI 98 (Tri)] that valuation of such physician samples is required to be made on the basis of pro rata value of the regular pack of the comparable goods in terms of the provisions of Rule 4 Issues: Valuation of physician samples manufactured on job work basis and those distributed for free.In this judgment by the Appellate Tribunal CESTAT, Chennai, the issue at hand involves the valuation of physician samples manufactured by an appellant, who is engaged in the manufacture of medicaments, including physician samples. The dispute arises from the different treatment required for physician samples manufactured on job work basis for other companies and those distributed for free by the appellants themselves. The Tribunal notes that the valuation of physician samples must be addressed separately based on how they are manufactured and distributed.Regarding physician samples manufactured on job work basis, the Tribunal finds that when these samples are cleared by the appellants on payment of Central Excise duty, the assessable value should be based on the transaction values as agreed upon between the parties. The Tribunal cites various decisions supporting this approach, emphasizing that when physician samples are not distributed free of cost but are cleared on receipt of consideration, excise duty is required to be paid on the transaction value. Therefore, the Tribunal rules that no further demand of duty is necessary when physician samples are manufactured under a contract with the brand owner and cleared based on the transaction value.On the other hand, for physician samples manufactured by some appellants on their own behalf and distributed free of cost, the Tribunal refers to a previous decision by the Larger Bench. The Larger Bench had held that the valuation of such physician samples should be based on the pro rata value of the regular pack of comparable goods. The appellants' argument that this decision was overruled by a subsequent Supreme Court decision is rejected by the Tribunal. The Tribunal clarifies that the Supreme Court did not consider the merits of the case but declined to entertain the appeal based on procedural grounds. Therefore, the Tribunal upholds the demands of duties for physician samples manufactured for free distribution based on the Larger Bench decision.In conclusion, the Tribunal declares the law on the valuation of physician samples, directing the lower authorities to apply the same by considering the relevant facts to quantify the demands of duties accordingly. All stay petitions and appeals related to this issue are disposed of in accordance with the Tribunal's findings.