Valuation of free physician samples may be based on comparable market goods with reasonable Rule 11 adjustments

Physician samples cleared free of cost and not sold were treated as identical to marketable medicines for valuation purposes, with differences in packing, marking and absence of MRP not preventing comparison. The text states that Rule 4 of the Central Excise Valuation Rules, 2000 applies where comparable goods are sold at or near the time of removal, and Rule 11 allows reasonable valuation consistent with the Rules. It further notes that Section 4A does not apply to non-MRP goods. On that basis, physician samples may be valued by reference to comparable market goods with reasonable adjustments under Rule 11.

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Issues: Whether physician samples cleared free of cost were liable to be valued on the basis of comparable goods under Rule 4 read with Rule 11 of the Central Excise Valuation Rules, 2000, or whether the valuation method suggested by the assessee could be applied.

Analysis: Physician samples were admittedly not sold and were cleared free of cost for distribution to doctors. The goods were identical in quality to the marketable medicines, and the difference was only in packing, marking and absence of MRP. Rule 4 of the Central Excise Valuation Rules, 2000 applies where goods similar or identical to the goods under assessment are sold at or near the time of removal, and Rule 11 permits valuation by reasonable means consistent with the principles of the Rules. The earlier decisions relied upon by the assessee did not displace the ratio of the Bombay High Court that physician samples may be valued by reference to comparable goods. Section 4A was also inapplicable because the samples were not MRP-based goods.

Conclusion: Physician samples were correctly valued by adopting comparable market goods under Rule 4 read with Rule 11, and the assessee's challenge failed.

Ratio Decidendi: Where physician samples are not sold but are identical to marketable goods, their assessable value may be determined by reference to comparable goods under the valuation rules, using reasonable adjustments under Rule 11.

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