2017 (11) TMI 1518 - AT - Central Excise

Tribunal rejects Revenue's valuation method, rules in favor of appellants

The Tribunal ruled in favor of the appellants, determining that the valuation method proposed by the Revenue, based on Rule 4 of the Central Excise ... Valuation - job-work - physician samples - samples sold on principal to principal basis and manufactured on job work basis and returned the goods to the principal - In case of sale of goods, the appellants are adopting the transaction value in terms of Section 4 (1) (a) of Central Excise Act, 1944 and in the case of job work they are paying duty on cost of manufacture plus 10% of notional profit - claim of the Revenue is that the value should have been arrived at on the basis of Rule 4 of Central Excise Valuation Rules, 2000 by taking the pro rata value of the trade pack of the same medicines. Held that: - very same issue decided in the case of Medispray Laboratories Pvt.Ltd. & Others [2017 (2) TMI 309-CESTAT Mumbai] - According to said judgement, Rule 4 of Central Excise Valuation Rules, 2000 shall apply only in those cases where the manufacturer manufacturing the physician samples and they themselves supplying free samples in the market and not in the case of physician samples sold on principal to principal basis. It was also held in the said judgements that in case of physician samples manufactured on job work basis and cleared to principal the valuation should be on 110% of the manufacturing cost. Appeal allowed - decided in favor of appellant. Issues: Valuation of physician samples sold to pharmaceutical company & manufactured on job work basis.Analysis:1. The main issue in the judgment is the valuation of physician samples sold to a pharmaceutical company, where the appellant valued the samples based on different criteria. The Revenue claimed that the valuation should be based on Rule 4 of Central Excise Valuation Rules, 2000, considering the pro rata value of the trade pack of the same medicines.2. The judgment cited a previous case where it was established that Rule 4 applies when manufacturers supply free samples in the market, not in cases of sales on a principal to principal basis. The appellant argued that they followed the correct valuation method based on previous judgments and the nature of their transactions.3. The Revenue reiterated their stance from the impugned order, emphasizing the application of Rule 4 for valuation under the Central Excise Valuation Rules, 2000.4. The Tribunal carefully considered both parties' submissions and referenced the judgment in a similar case involving physician samples. It was noted that the valuation method adopted by the appellants was in accordance with the principles laid down by the Supreme Court in a previous case regarding job work valuation.5. The Tribunal concluded that the valuation proposed by the Revenue was incorrect for all appellants, as they were not supplying physician samples free of cost and the transactions were either on job work or principal to principal basis. The judgment set aside the impugned orders and allowed the appeals, stating that Rule 4 valuation did not apply in these circumstances.6. The decision highlighted the identical nature of the facts in the present case and the previous judgment, leading to the setting aside of the impugned order and allowing the appeal.This comprehensive analysis covers the issues of valuation of physician samples sold to a pharmaceutical company and manufactured on job work basis, detailing the arguments presented by both parties and the Tribunal's reasoning based on legal principles and previous judgments.