2017 (2) TMI 309 - AT - Central Excise

Physician samples valuation: Act over Rules. Revenue's method incorrect. Appeals allowed.

The Tribunal held that the valuation of physician samples manufactured and supplied on a loan license or job-work basis should be governed by Section 4 of ... Valuation of physician samples - applicability of Rule 4 of the Central Excise Valuation Rules, 2000 - transaction value under Section 4 of the Central Excise Act - valuation of goods manufactured on job work basis - Ujagar Prints principle: cost of raw material plus job charges including profit of the job workerValuation of physician samples - applicability of Rule 4 of the Central Excise Valuation Rules, 2000 - transaction value under Section 4 of the Central Excise Act - Whether Rule 4 valuation applies to physician samples manufactured by appellants who do not supply the samples themselves but manufacture on behalf of principals (job work or principal to principal), or whether valuation is governed by transaction value under Section 4. - HELD THAT: - The Tribunal held that Rule 4 of the Central Excise Valuation Rules, 2000 applies only where the manufacturer who makes physician samples also supplies them free in the market. All three appellants manufactured physician samples for buyers (either on job work basis or on a principal to principal sale) and did not themselves supply free samples to the market. Therefore the question of valuation of physician samples is not concerned with these appellants under Rule 4. In such cases the valuation is governed by the transaction value provisions under Section 4 of the Central Excise Act, and Rule 4 cannot be invoked to determine value of these clearances. [Paras 5]Rule 4 valuation does not apply; valuation of the appellants' clearances is governed by transaction value under Section 4.Valuation of goods manufactured on job work basis - Ujagar Prints principle: cost of raw material plus job charges including profit of the job worker - How to determine value where physician samples are manufactured on job work basis for a principal. - HELD THAT: - The Tribunal applied the principle laid down by the Hon'ble Supreme Court in Ujagar Prints that for job work clearances the valuation should be determined on the basis of cost of raw material plus job charges including the profit of the job worker. The Tribunal noted that the Revenue did not contend that the value declared by the appellants was less than the value that would result from applying the Ujagar Prints principle, and accordingly found no basis to increase valuation. [Paras 5]Value of job work manufacture shall be computed as cost of raw material plus job charges including the job worker's profit; appellants' declared value stands.Transaction value under Section 4 of the Central Excise Act - principal to principal sale - Whether the sale by Okasa Pvt. Ltd. to its principal on a principal to principal basis can be accepted as transaction value under Section 4. - HELD THAT: - The Tribunal found that Okasa's clearances were genuine principal to principal sales to the buyer and thus the price received from that sale constitutes the transaction value within the meaning of Section 4. Consequently, Rule 4 valuation could not be applied to revalue those clearances. [Paras 5]Principal to principal sale by Okasa constitutes transaction value under Section 4 and is acceptable for valuation.Final Conclusion: The appeals are allowed: the demand framed by applying Rule 4 to the appellants' clearances is set aside; valuation of job work manufacture must follow the Ujagar Prints principle and principal to principal sales are to be valued under Section 4. Issues Involved:Valuation of physician samples manufactured and supplied on loan license basis or job-work basis.Analysis:The issue in the present appeals pertains to the valuation of physician samples manufactured and supplied either on a loan license basis or on a job-work basis. The Department contended that valuation should be done under Rule 4 of the Central Excise Valuation Rules, 2000, based on Board's Circular. The Department upheld a differential duty demand, which was confirmed by the Commissioner (Appeals).In response, the appellant argued that they are not the owners of the goods and are not supplying physician samples free of cost in the market. For cases where the samples were manufactured on a job-work basis, the appellant emphasized that there is a deemed sale value, and duty is paid on such value. The appellant relied on various judgments to support their argument.The Revenue, on the other hand, reiterated the findings of the impugned order and emphasized the Board's Circular stating that the value should be determined under Rule 4 of the Central Excise Valuation Rules, 2000. The Revenue also cited judgments to support their stance.Upon considering the submissions of both parties, it was observed that all three appellants were manufacturing physician samples on behalf of buyers, either on a job-work basis or a principal-to-principal basis. Hence, the valuation of physician samples in this case is not applicable under Rule 4 of the Central Excise Valuation Rules, 2000. The valuation should be governed by Section 4 of the Central Excise Act, and in the case of job-work, it should be determined based on the principles established by the Supreme Court. The Tribunal found that the valuation proposed by the Revenue for all three appellants was incorrect, and the demands based on that valuation were not sustainable. Therefore, the impugned orders were set aside, and the appeals were allowed.