2014 (2) TMI 581 - AT - Central Excise

Tribunal rules in favor of appellant on valuation of physician samples under Central Excise Act

M/s GELNOVA LABORATORIES (I) PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE

M/s GELNOVA LABORATORIES (I) PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE - 2014 (300) E.L.T. 437 (Tri. - Mumbai) Issues Involved:1. Valuation of physician samples for excise duty purposes.2. Applicability of Section 4 vs. Section 4A of the Central Excise Act, 1944.3. Invocation of the extended period of limitation for the first demand.4. Assessment of physician samples manufactured on a principal-to-principal basis.Detailed Analysis:Issue 1: Valuation of Physician Samples for Excise Duty PurposesThe appellant, a manufacturer of P & P medicaments, including physician samples, faced multiple show-cause notices regarding the valuation method for excise duty. The appellant cleared these samples based on the transaction value under Section 4(1)(a) of the Central Excise Act, 1944, as these samples were not meant for retail sale and thus did not require an MRP. The Revenue, however, contended that the duty should be discharged based on the value arrived at under Section 4A, which considers the MRP for similar retail packs.Issue 2: Applicability of Section 4 vs. Section 4A of the Central Excise Act, 1944The central dispute was whether the physician samples should be valued under Section 4 (transaction value) or Section 4A (MRP-based value). The appellant argued that since the samples were sold on a principal-to-principal basis and not meant for retail, Section 4(1)(a) was applicable. The Revenue countered, citing the Larger Bench decision in Cadila Pharmaceuticals Ltd., that once an item is covered under Section 4A, it must be assessed under this section, regardless of its intended use.Issue 3: Invocation of the Extended Period of Limitation for the First DemandThe appellant contended that the extended period of limitation should not be invoked as their factory had been operational since 2002, consistently following the same valuation method without objection from the department. The department's audit in December 2006 raised the issue, but the show-cause notice was issued much later, indicating no suppression of facts or intent to evade duty.Issue 4: Assessment of Physician Samples Manufactured on a Principal-to-Principal BasisThe appellant argued that their transactions with pharmaceutical companies were on a principal-to-principal basis, where they procured raw materials, manufactured the products, and sold them at mutually agreed prices. Thus, the assessment should be under Section 4(1)(a). The Revenue, however, maintained that goods covered under Section 4A must be assessed under this section due to its non-obstante clause, which overrides Section 4.Judgment Analysis:The Tribunal considered the submissions from both sides. It noted that P.P. Medicaments are covered under Section 4A, as specified in Notification No. 2/2005-CE (N.T) dated 07.01.2005. However, the Tribunal highlighted that the requirement to display the retail price applies only to goods intended for sale, not physician samples. The Tribunal also referenced various case laws supporting the appellant's stance that physician samples sold on a principal-to-principal basis should be assessed under Section 4(1)(a).The Tribunal concluded that the physician samples, not being intended for retail sale, did not require MRP labeling and thus should be assessed under Section 4(1)(a). Consequently, all four appeals were allowed, rejecting the Revenue's contention.Conclusion:The Tribunal ruled in favor of the appellant, determining that physician samples manufactured on a principal-to-principal basis should be valued under Section 4(1)(a) of the Central Excise Act, 1944, as they are not intended for retail sale and thus do not fall under the purview of Section 4A. The extended period of limitation for the first demand was also deemed unjustified.