2017 (12) TMI 156 - AT - Central Excise

Tribunal sets aside Revenue's valuation of physician samples, ruling in favor of appellants

The Tribunal ruled in favor of the appellants, setting aside the Revenue's proposed valuation of physician samples. It held that the valuation should be ... Valuation - physician samples sold on principal to principal basis and cleared on job work basis - Held that: - Identical issue involved in the present case has already been decided in the appellants own case M/s Medispray Laboratories Pvt. Ltd., M/s Meditab Specialities Pvt. Ltd., And M/s Okasa Pvt. Ltd. Versus Commissioner of Central Excise, Goa [2017 (2) TMI 309 - CESTAT MUMBAI], where it was held that 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 sample in the market. In the present case, all the three appellants are not supplying physician samples free of cost either in case of job-work basis or in the sale basis, the goods are sold to the principal. In such case, irrespective it is physician samples, the valuation shall be governed by Section 4 of the Central Excise Act - The valuation shall be determined on the basis of cost of raw material + job charges including the profit of the job worker. Appeal allowed - decided in favor of appellant. Issues Involved:Valuation of physician samples sold on principal to principal basis and cleared on job work basis.Analysis:The issue involved in the present case pertains to the valuation of physician samples that were manufactured and supplied either on a loan license basis or on a job-work basis. The Department contended that the valuation should be done under Rule 4 of the Central Excise Valuation Rules, 2000, based on Boards Circular No.619/10/2002-CX. The contention was that the value of similar medicaments sold in the market should be taken as the value of physician samples, leading to a differential duty demand. However, the appellant argued that in their case, the physician samples were not supplied free of cost in the market and were either sold on a principal to principal basis or manufactured on job-work basis. They relied on various judgments to support their argument, emphasizing that the transaction value falls under Section 4(1)(a) of the Central Excise Act, 1944, and not Rule 4 of the Valuation Rules.The Department, on the other hand, reiterated the findings of the impugned order, emphasizing the importance of determining the value of physician samples under Rule 4 of the Central Excise Valuation Rules, 2000, as clarified in Boards Circular No.813/10/2005-CX. They supported their stance by citing relevant judgments. Upon considering the submissions from both sides, the Tribunal observed that the appellants were manufacturing physician samples on behalf of buyers either on a job-work basis or a principal to principal basis, and were not supplying free samples in the market. Therefore, the valuation of physician samples in such cases should be governed by Section 4 of the Central Excise Act. The Tribunal also referred to the principles laid down by the Hon'ble Supreme Court in the case of Ujagar Prints for valuation in job-work scenarios.In conclusion, the Tribunal found that the valuation proposed by the Revenue for all three appellants was incorrect as they were not supplying physician samples free of cost. The Tribunal set aside the impugned orders and allowed the appeals based on the principles discussed in the appellants' own case. The judgment highlighted that the valuation issue in both types of clearances, i.e., sale on a principal to principal basis and on a job work basis, had been addressed in previous decisions, leading to the allowance of the appeal.Therefore, the Tribunal ruled in favor of the appellants, emphasizing that the valuation of physician samples should be determined based on the principles of Section 4 of the Central Excise Act and the specific circumstances of the case, rather than applying Rule 4 of the Valuation Rules in situations where samples are not supplied free of cost in the market.