2001 (10) TMI 417 - AT - Central Excise

Summary

Issues: Valuation of physician's samples packed as Novamox dry syrup, Interpretation of agreement terms, Application of Section 4 proviso for related persons

Valuation of Physician's Samples:
The appeal (E/1309/96) by Okasa concerns the valuation of physician's samples packed as Novamox dry syrup. Initially, the appellant sold these packs at Rs. 6.47, as per the agreement. However, discrepancies arose when the price list indicated different assessable values for the same product. The department contended that having two values for the same commodity was not permissible. The Assistant Collector and the Collector (Appeals) upheld this view. The appellant argued that the earlier price of Rs. 8.09 for the trade pack was erroneous and corrected it in a subsequent price list, showing the assessable value as Rs. 6.47. The department, on the other hand, maintained that there cannot be two prices for the same commodity.

Interpretation of Agreement Terms:
The agreement between Okasa and Cipla, the manufacturer and buyer respectively, allowed Okasa to sell products directly to other parties besides Cipla. The department's contention was that the price at which Okasa sold goods to Cipla should be considered the normal price, as per Section 4 proviso. However, the Commissioner (Appeals) found no established relationship between the two entities. The department's appeal (E/2098/00) argued that the agreement indicated a principal-agent relationship, with Cipla exercising control over Okasa's manufacturing process. The Tribunal, however, found no evidence of such control in the agreement, emphasizing that it was a simple agreement for sale with no reference to manufacturing specifics.

Application of Section 4 Proviso for Related Persons:
Regarding the application of Section 4 proviso for related persons, the department's appeal contended that the transfer of goods from Okasa to Cipla's warehouse did not constitute a normal sale at the factory gate. The department argued that the price in the agreement was not the normal price under Section 4. The Tribunal dismissed this argument, highlighting that the agreement did not demonstrate any control by Cipla over Okasa's operations. The Tribunal also rejected the department's reliance on a previous decision, emphasizing that the agreement allowed Okasa to sell goods directly to other parties, indicating an absence of a related relationship between Okasa and Cipla.

In conclusion, the Tribunal allowed Okasa's appeal (E/1309/96) and set aside the impugned order, emphasizing that the correct assessable value for the physician's samples should be based on the price at which Okasa sold goods to Cipla. The Tribunal's decision underscored the importance of interpreting agreements based on their explicit terms and the absence of evidence supporting related party transactions as per Section 4 proviso.