2017 (2) TMI 315 - AT - Central Excise

Tribunal Overturns Penalty on Duty Paid for Physician's Samples Valuation

Cosme Remedies Pvt. Ltd., Blossom Pharmaceuticals, Centaur Pharmaceuticals Pvt. Ltd. And Cosme Pharma Ltd. Versus Commissioner of Central Excise, Goa

The Tribunal set aside the penalty imposed on duty paid for physician's samples manufactured on a job work basis. The appellants successfully argued that ... Imposition of penalty - job-work - manufacture of physicians samples on job work basis - Rule 4 of the Central Excise Valuation Rules applicable or not? Held that: - identical issue has been decided by the Tribunal in the case of Omni Protech Ltd 2011 [2011 (6) TMI 532 - CESTAT, MUMBAI], where it was held that in the case of Themis Laboratories Pvt. Ltd. (2011 - TMI - 207729 - CESTAT, MUMBAI - Central Excise) appellant has correctly valued their product i.e. cost of raw material inputs + job charges - Rule 4 not applicable. Appeal allowed - decided in favor of appellant. Issues:Challenging penalty imposed on duty paid for physician's samples manufactured on job work basis.Analysis:The appellants filed four appeals challenging the duty demand on physician's samples manufactured on job work basis. They paid the duty and interest but contested the penalty. The dispute centered on assessing the value of the samples based on Rule 4 of the Central Excise Valuation Rules against the pro rata value basis. The lower authorities upheld the demands, prompting the appellants to approach the Tribunal.The crux of the argument revolved around whether the assessable value of the physician's samples could be determined on a pro rata basis using the MRP based assessable value of similar goods. The appellants contended that they were not providing the goods free of cost but on a job work basis. Citing legal precedents like the Sun Pharmaceuticals case and a Tribunal order in a similar matter, the appellants sought to set aside the demands and penalties.On the other hand, the respondent supported the impugned order and referred to a decision involving Cadila Pharmaceuticals Ltd. The Tribunal referred to a past case involving Omni Protech Ltd., which was affirmed by the Apex Court in the Sun Pharmaceuticals case. The Apex Court's ruling emphasized that the transaction between job workers and principal manufacturers did not involve providing goods free of cost, as the job workers recovered their dues.The Tribunal's analysis highlighted that the appellants were not supplying the physician's samples free of cost but on a transaction value basis, including raw material costs and job charges. Following the principles laid down in relevant case laws, the Tribunal concluded that the appellants had correctly valued their products. Consequently, the impugned order was set aside, and the appeals were allowed without delving into the issue of limitation.In conclusion, the Tribunal's decision was based on established legal principles and precedents, ultimately upholding the appellants' position regarding the valuation of physician's samples manufactured on job work basis. The judgment underscored the importance of transaction value and the absence of goods being provided free of cost in such arrangements, leading to the allowance of the appeals.(Pronounced in Court on 27/01/17)