Institutional medicament supplies valued under transaction value, while debatable control-samples penalty was set aside.

Medicaments supplied to hospitals and other institutional buyers for non-retail consumption are not covered by MRP-based valuation under Section 4A; they are assessable on transaction value under Section 4. The reference to retail sale in the governing notification applies only to goods intended for retail sale, so institutional supplies fall outside the Section 4A regime. On the control samples issue, penalty was not justified because the matter was debatable and had divergent views, and the corresponding penalty was set aside while the admitted duty or credit component remained undisturbed.

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Issues: (i) Whether medicaments supplied to institutional buyers are liable to valuation under Section 4 or Section 4A of the Central Excise Act, 1944. (ii) Whether penalty is leviable in relation to the control samples issue.

Issue (i): Whether medicaments supplied to institutional buyers are liable to valuation under Section 4 or Section 4A of the Central Excise Act, 1944.

Analysis: The valuation dispute turned on whether goods supplied for consumption by hospitals and other institutions, and not intended for retail sale, could be brought under the MRP-based regime. The cited precedent consistently held that where no retail sale price is affixed and the supplies are for institutional consumption, the goods are not covered by the MRP-based valuation under Section 4A. Such supplies are to be assessed on transaction value under Section 4, and the reference to retail sale in the governing notification and price-control framework was treated as confined to goods offered for retail sale.

Conclusion: The issue is decided in favour of the assessee. Valuation of institutional supplies is under Section 4 and not Section 4A.

Issue (ii): Whether penalty is leviable in relation to the control samples issue.

Analysis: The duty or credit element relating to control samples was not contested on merits, but the issue was treated as debatable because of divergent views. On that footing, penalty was held to be unwarranted for the amount relatable to control samples.

Conclusion: The issue is decided in favour of the assessee. The corresponding penalty is set aside.

Final Conclusion: The impugned orders were modified by applying Section 4 to the institutional-supply valuation dispute and by deleting the penalty relating to control samples, while leaving the admitted duty or credit component undisturbed.

Ratio Decidendi: Goods supplied to institutional buyers for non-retail consumption are not assessable on MRP-based valuation under Section 4A and are to be valued under Section 4; where the issue is debatable, penalty is not warranted.

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