Successful Appeal Against Duty Liability & Penalty for Physician Samples Clearance under Central Excise Act

The Tribunal allowed the appeal against duty liability and penalty under the Central Excise Act, 1944 for clearance of physician samples. The appellant's argument that duty liability was discharged based on cost-construction rules was accepted, emphasizing the settled issue of valuation of physician samples supplied free of cost. The Tribunal distinguished the case from precedent, ruling the impugned order unsustainable and setting it aside, allowing the appeals. The judgment was delivered on 16/10/2019 by the Tribunal comprising Hon'ble Mr. C J Mathew and Hon'ble Dr. Suvendu Kumar Pati.

---

---

Issues:
Appeal against duty liability and penalty under Central Excise Act, 1944 for clearance of physician samples.

Analysis:
The appellant contested the duty liability and penalty imposed under section 11A of the Central Excise Act, 1944, amounting to Rs. 25,72,273, for the period from March 2007 to June 2009, related to the clearance of physician samples. The appellant, functioning as a job-worker, argued that duty liability was discharged based on cost-construction as per rule 8 of Central Excise Valuation Rules for certain clearances to M/s Serum Institute. The appellant highlighted that the show cause notice for the subsequent period was time-barred under section 11A. Additionally, the issue of valuation of physician samples supplied free of cost to buyers/principal manufacturers had been settled by previous Tribunal decisions and affirmed by the Supreme Court in various cases.

The Authorized Representative for the respondent relied on a Tribunal decision in the case of Goa Antibiotics & Pharmaceuticals Ltd, stating that when a principal manufacturer directs payment of duty on a specific assessable value for clearances not for captive consumption but for further free distribution, the nearest transaction value should be adopted for assessment. However, the Tribunal noted that the circumstances in the present case were different from the Goa Antibiotics case as the value was not determined by cost construction, and the direction to adopt a specific value did not indicate a lack of principal-to-principal relationship between the parties.

The Tribunal observed that the appellant did not clear physician samples except to principal manufacturers and M/s Serum Institute, making the application of rule 4 of Central Excise Valuation Rules inappropriate in this scenario. Relying on precedents like Sun Pharmaceutical Industries Ltd and Medispray Laboratories Pvt Ltd, the Tribunal concluded that the impugned order was unsustainable and set it aside, allowing the appeals. The judgment was pronounced on 16/10/2019 by the Tribunal comprising Hon'ble Mr. C J Mathew, Member (Technical), and Hon'ble Dr. Suvendu Kumar Pati, Member (Judicial).

---