Comparable goods valuation governs physician sample medicines; costing method applies only when no comparable value can be determined.

Where physician's free medicine samples are identical to commercial packs in substance, valuation must begin with comparable goods under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975, with reasonable adjustments for material differences. The costing method under Rule 6(b)(ii) applies only if comparable value cannot be determined. The CESTAT note states that the samples and retail packs contained the same medicine and differed only in pack size, colour scheme and markings, so there was no basis to bypass the comparable-goods method. Chapter Note 5 of Chapter 30 did not alter the material identity of the medicine for valuation purposes.

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Issues: Whether physician's free samples of medicines are to be valued on the basis of comparable commercial packs under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975, or by the costing method under Rule 6(b)(ii) of those Rules.

Analysis: The free samples and the regular retail packs contained the same medicine and differed only in pack size, colour scheme and markings. Section 4(1)(b) of the Central Excise Act, 1944 contemplates valuation on the nearest ascertainable equivalent where normal price is not ascertainable, and the valuation rules first require resort to comparable goods before the costing method can be used. Rule 4 applies where the non-sold goods are identical to the sold goods and permits adjustment only for difference in dates of delivery. Rule 6(b)(i) is broader and permits comparison with comparable goods together with reasonable adjustments for material differences. Since the physician's samples were comparable goods and the medicine itself remained materially identical, there was no warrant to bypass Rule 6(b)(i) and adopt Rule 6(b)(ii). Chapter Note 5 of Chapter 30 did not change the material characteristics of the medicine so as to exclude comparison.

Conclusion: Physician's free samples are to be valued under Rule 6(b)(i) on the basis of comparable goods, with reasonable adjustments, and not under the costing method in Rule 6(b)(ii).

Final Conclusion: The reference was answered in favour of valuation by comparable goods and the contrary view was overruled, leaving the appeal to be decided by the regular bench on the merits.

Ratio Decidendi: Where free samples contain the same medicine as commercial packs, valuation must first be made by reference to comparable goods with reasonable adjustments for material differences, and the costing method applies only when such comparable value cannot be determined.

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