Physician samples of medicaments cleared on a principal-to-principal basis are valued on transaction value, not retail price.

Physician samples of medicaments cleared on a principal-to-principal basis were not intended for retail sale, so no retail sale price declaration was required under the Drugs (Prices Control) Order, 1995. Although the goods were medicaments notified under section 4A of the Central Excise Act, 1944, section 4A could not apply merely on that basis because the valuation trigger is retail sale pricing for goods meant for sale. The proper valuation was transaction value under section 4(1)(a), and section 4A valuation was inapplicable.

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Issues: Whether physician samples manufactured on a principal-to-principal basis for a pharmaceutical company are to be valued under section 4(1)(a) of the Central Excise Act, 1944 as transaction value, or under section 4A of that Act on the basis of retail sale price.

Analysis: The goods in question were medicaments covered by section 4A and notified with effect from 8 January 2005. The determining factor, however, was whether the goods were intended for sale so that declaration of retail sale price was required under the Drugs (Prices Control) Order, 1995. The pricing regime under that Order showed that retail price disclosure is meant for formulations intended for sale, including the display requirements in paragraph 14(2). Physician samples are not intended for retail sale. The Tribunal also noted that the assessee manufactured and cleared the samples on a principal-to-principal basis to the customer, and that this view had been consistently taken in prior decisions relied upon by the assessee.

Conclusion: Physician samples manufactured on a principal-to-principal basis were liable to be assessed under section 4(1)(a) of the Central Excise Act, 1944 and not under section 4A.

Final Conclusion: The valuation adopted by the assessee was upheld, and the demands based on section 4A valuation could not survive.

Ratio Decidendi: Where medicaments are not intended for retail sale and no retail sale price is required to be declared, section 4A valuation cannot be applied merely because the goods are otherwise notified; the proper basis is transaction value under section 4(1)(a) when the clearance is on a principal-to-principal basis.

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