Excise duty on physician samples upheld despite cost being built into commercial pack pricing; remand scope barred new marketability plea.

Excise duty remained chargeable on physician samples removed by the manufacturer even though their cost was included as promotional expense in the assessable value of commercial packs; the added element in the sale price did not prevent duty on the samples themselves under the Central Excise valuation scheme. A further challenge that the samples were not marketable could not be raised in remanded proceedings because the Supreme Court had confined remand to whether their cost had been included in the price of drugs sold. The duty demand and penalty were sustained, and the appeals failed.

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Issues: (i) Whether the cost of physician samples was already included in the sale price of the commercial packs and, if so, whether duty on the samples was still sustainable under the excise valuation scheme; (ii) Whether the plea that physician samples were not marketable could be raised at the stage of remand.

Issue (i): Whether the cost of physician samples was already included in the sale price of the commercial packs and, if so, whether duty on the samples was still sustainable under the excise valuation scheme.

Analysis: The material on record, including the cost accountant's certificate and the affidavit filed before the Supreme Court, showed that the cost of physician samples formed part of the manufacturer's promotional expenses and was built into the assessable value of the commercial packs. Even so, excise duty is attracted on manufacture and removal of the samples themselves. The contention that duty would amount to a second levy was rejected, and the earlier Tribunal view treating the added element in the sale price as sufficient to exclude duty on removal was not accepted. The valuation and duty liability were upheld under Section 4(1)(b) of the Central Excise Act and the relevant valuation rules.

Conclusion: The duty demand on physician samples was sustainable and was rightly upheld.

Issue (ii): Whether the plea that physician samples were not marketable could be raised at the stage of remand.

Analysis: The remand by the Supreme Court was confined to the question whether the cost of physician samples had been included in the cost of the drugs sold. The marketability objection, founded on the Drugs and Cosmetics Rules, was outside that limited remit and therefore could not be entertained in the remanded proceedings.

Conclusion: The marketability plea was not open to the appellants and was rejected.

Final Conclusion: The demand of duty and the penalty were sustained, and the appeals failed in full.

Ratio Decidendi: In excise, duty remains chargeable on manufactured goods removed as physician samples even where their cost is included in the price of commercial packs, and a plea beyond the limited scope of remand cannot be entertained.

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