Marketability and comparable goods control excise treatment of physician samples of medicines under valuation rules.

Physician samples of medicines were treated as excisable goods because marketability depends on capability of being marketed, not actual sale. The samples were the same medicines as the trade packs, with only packing and a "not for sale" marking different, so their character as goods remained unchanged and excise duty applied. For valuation of unsold samples, Rule 6(b)(i) governed where identical comparable goods were available, because the assessable value had to reflect the nearest ascertainable equivalent of normal price. Cost of production under Rule 6(b)(ii) was only a fallback and was not applicable here.

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Issues: (i) Whether physician samples of medicines were excisable goods on the test of marketability; (ii) whether, for valuation of physician samples, the assessable value had to be determined on the basis of comparable goods under Rule 6(b)(i) or on cost of production under Rule 6(b)(ii).

Issue (i): Whether physician samples of medicines were excisable goods on the test of marketability.

Analysis: The goods cleared as physician samples were the same medicines as those sold in trade packs, differing only in packing and the marking that they were not for sale. Marketability does not require proof of actual sale in the market; it is enough if the goods are capable of being marketed. The fact that a part of the same manufactured medicines was distributed free as samples did not alter their character as goods, since the ingredients, qualities and curative effect remained the same.

Conclusion: Physician samples were marketable goods and were liable to excise duty.

Issue (ii): Whether, for valuation of physician samples, the assessable value had to be determined on the basis of comparable goods under Rule 6(b)(i) or on cost of production under Rule 6(b)(ii).

Analysis: Section 4(1)(b) of the Central Excise Act and the Valuation Rules require the value of goods not sold to be determined at the nearest ascertainable equivalent of normal price. Rule 6(b)(i) applies where comparable goods are available, while Rule 6(b)(ii) based on cost of production is only a fallback when value cannot be determined under sub-clause (i). Since the physician samples and the traded medicines were identical in content and effect, the different packing did not prevent comparison and the value was correctly adopted with reference to comparable goods.

Conclusion: Valuation under Rule 6(b)(i) was correct and cost-based valuation under Rule 6(b)(ii) was not applicable.

Final Conclusion: The appeal was rejected because physician samples were held to be excisable goods and their valuation was properly based on comparable goods.

Ratio Decidendi: Goods remain excisable if they are marketable, even when not actually sold, and where identical goods are available for comparison, valuation must be based on comparable goods rather than cost of production.

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