2004 (5) TMI 92 - AT - Central Excise

Interpretation of Drug Pricing Order & Excise Valuation Rules: Key Tribunal Clarification

The Larger Bench clarified that conflicting views on the issue did not apply to the current appeal. The interpretation of the Drug Prices Control Order, ... Valuation (Central Excise) - Formulation of drugs Issues:- Conflicting views on the issue raised by the Tribunal- Assessable value computation under Central Excise Act, 1944- Interpretation of Drug Prices Control Order (DPCO), 1995- Distinction between bulk drugs and formulation of drugs- Valuation under Section 4 of the Central Excise Act, 1944Analysis:1. Conflicting Views: The appeal was referred to a Larger Bench due to conflicting views expressed by the Tribunal on the raised issue. However, upon detailed examination, it was determined that the conflicting decisions do not apply to the current appeal, leading to the conclusion that the issue in question does not arise in this case.2. Assessable Value Computation: The Commissioner (Appeals) held that even if the product was sold below the maximum price fixed under the DPCO, 1995, for assessing the value under Section 4 of the Central Excise Act, the maximum price fixed under DPCO must be considered as the normal price. This interpretation was a crucial aspect of the case.3. Interpretation of DPCO, 1995: It was established that the products in question were formulations of drugs, not bulk drugs. The maximum price fixed under DPCO for drugs pertained to retail prices, as confirmed by the relevant order. The calculation of the retail price was outlined in detail, emphasizing factors like material cost, conversion cost, packing charges, and post-manufacturing expenses.4. Bulk Drugs vs. Formulation of Drugs: The distinction between bulk drugs and drug formulations played a significant role in determining the applicable pricing regulations and valuation methods. The Tribunal noted that the ceiling price fixed under DPCO for the drugs involved in the appeal was based on retail prices, not wholesale prices, which influenced the valuation process under Section 4.5. Valuation under Section 4: The Tribunal clarified that for valuation purposes under Section 4 of the Central Excise Act, the wholesale price should be considered, not the retail price. Since the ceiling price fixed under DPCO was based on retail prices, it was deemed irrelevant for valuation under Section 4. Consequently, the demand for duty was deemed unsustainable in this case, leading to the setting aside of the impugned orders and allowing the appeals. The decision highlighted the importance of correctly interpreting pricing regulations and valuation methods in excise matters.