Valuation of physician samples follows comparable commercial packs first; cost method applies only if comparable pricing is not workable.

Physician's free samples of identical medicaments are to be valued by reference to comparable commercial packs under rule 6(b)(i) of the Central Excise Valuation Rules, 1975, because non-sold goods must first be valued against comparable goods with reasonable adjustments for material differences. The smaller pack size and different labelling for non-sale did not change the essential characteristics of the medicines, so the samples remained materially comparable to sold packs. The cost method under rule 6(b)(ii) applies only as a residual measure when value cannot reasonably be determined under rule 6(b)(i), and Chapter Note 5 of Chapter 30 did not justify a different valuation approach.

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

Analysis: The goods in question were identical medicaments, though the physician's samples were in smaller packs and carried different labelling indicating that they were not for sale. Section 4(1)(b) of the Central Excise Act permits valuation at the nearest ascertainable equivalent where normal price is not ascertainable, and the valuation rules require first resort to comparable goods before the cost method can be used. Rule 6(b)(i) specifically governs non-sold goods by reference to comparable goods, with reasonable adjustments for material differences, while rule 6(b)(ii) applies only if value cannot be determined under sub-clause (i). The difference in pack size and labelling did not alter the essential material characteristics of the medicament, and Chapter Note 5 of Chapter 30 did not justify treating the samples as a wholly different product for valuation purposes.

Conclusion: Physician's free samples are to be valued under rule 6(b)(i) on the basis of comparable commercial goods, and the cost method under rule 6(b)(ii) is not attracted.

Final Conclusion: The correct legal position is that free physician's samples of identical medicines are to be valued by comparison with commercial packs, with reasonable adjustments for any material differences, and not by direct recourse to costing.

Ratio Decidendi: Where excisable goods are not sold but are materially comparable to sold goods of the assessee, valuation must first be made on the basis of comparable goods with appropriate adjustments, and the cost method is available only as a residual resort when comparable valuation cannot be reasonably determined.

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