Physician sample valuation follows transaction value or cost-plus-job-work basis; MRP-based excise duty is unsustainable.

Physician samples were not to be valued on an MRP basis when they were sold to distributors or manufactured on job work for others. Where the manufacturer sold samples to distributors, the subsequent free distribution by those buyers did not alter the valuation, and the transaction value between manufacturer and buyer remained decisive under Section 4(1)(a) of the Central Excise Act, 1944. Where the goods were manufactured on job work, valuation had to follow the settled cost-plus-job-work method consistent with Ujagar Prints. In both situations, MRP-based duty valuation was held to be unsustainable.

---

---

Issues: Whether physician samples sold to distributors or manufactured on job work basis for others were assessable under Section 4(1)(a) of the Central Excise Act, 1944 on transaction value, or could be valued on the basis of MRP for levy of duty.

Analysis: The physician samples were not cleared by the manufacturer free of cost to doctors or physicians. Where the samples were sold to distributors, the subsequent free distribution by those distributors was held to be irrelevant for valuation, and the transaction between the manufacturer and the buyer remained the governing basis. Where the samples were manufactured on job work basis, the applicable valuation principle was the cost of raw materials plus job charges, in line with the settled principle in Ujagar Prints. In both situations, adoption of MRP-based valuation was held to be unsustainable.

Conclusion: The physician samples were assessable under Section 4(1)(a) of the Central Excise Act, 1944 on the appropriate transaction value or cost-plus-job-work basis, and the demand raised on MRP basis was not sustainable.

---