Physician sample valuation under excise law follows pro-rata method, not cost-plus rule 8, for free samples.

Physician samples of medicines cleared free of cost remain liable to excise duty because duty is attracted by manufacture, not sale. For valuation of such free samples, the applicable method is pro-rata valuation under rule 4, not the cost-plus method under rule 8, even where the goods are otherwise covered by section 4A. The authorities therefore rejected the appellant's rule 8 valuation and sustained the demand, interest, and penalty, following the principle affirmed by the Larger Bench and the Supreme Court.

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Issues: Whether physician samples of medicines, cleared free of cost and covered by section 4A valuation, were to be valued under rule 4 on a pro-rata basis or under rule 8 on a cost-plus basis.

Analysis: The dispute turned on the method of valuation applicable to physician samples. The controlling legal position, as affirmed by the Larger Bench and the Supreme Court, was that physician samples remain exigible to excise duty because duty is on manufacture and not on sale. For valuation, the governing approach for such free samples is pro-rata valuation under rule 4, and not the cost of manufacture plus 15% profit method under rule 8. The authorities below had followed the same principle while rejecting the appellant's valuation based on rule 8.

Conclusion: The valuation adopted by the appellant under rule 8 was rejected, and the demand, interest, and penalty were sustained. The issue is decided against the assessee and in favour of the Revenue.

Ratio Decidendi: Physician samples are to be valued on a pro-rata basis under the applicable excise valuation rule for free samples, and not on a cost-plus basis under rule 8 merely because the goods are otherwise notified under section 4A.

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