2003 (2) TMI 269 - AT - Central Excise

Summary

Issues:
Effect of amendment in Section 4 (Valuation) of Central Excise Act, 1944 on the valuation of medicines subject to Maximum Retail Price.

Analysis:
The controversy in the appeals revolved around the amendment in Section 4 of the Central Excise Act, specifically regarding the valuation of medicines subject to Maximum Retail Price (MRP) fixed under the Drug (Control) Law or by manufacturers. The disagreement between the appellants and Revenue centered on the adoption of depot prices for assessing central excise duty post-amendment. The appellants argued for batch-wise valuation based on fixed prices, while Revenue contended that batch distinctions were irrelevant as the same medicine was manufactured continuously. The appellants emphasized that medicines were identified and priced batch-wise, as recognized by all stakeholders, contrary to Revenue's stance.

The appellants elaborated that medicines were monitored and priced based on their Batch of production, emphasizing that prices were fixed batch-wise under the Drugs (Control) Law. They argued that considering goods from different batches as distinct, as per Section 4 of the Act, was a well-established commercial practice. Referring to a tribunal decision and a Circular clarifying the term "such goods," the appellants contended that each lot or consignment should be treated as "such goods," supporting their batch-wise valuation argument.

On the contrary, the Revenue argued that there was no material difference in medicines produced under different batches, emphasizing that batch-wise identification was merely a matter of convenience for quality control and recall purposes. They highlighted that Drug Control Authorities did not fix prices batch-wise, and batch distinctions were not unique to medicines. The Revenue stressed that recognizing batch-wise valuation would introduce uncertainty and potential abuse in tax administration.

The judgment emphasized the well-established practice in the pharmaceutical industry of identifying and pricing medicines batch-wise for quality control, expiry, and pricing purposes. It highlighted that tax authorities should align with commercial practices to avoid disruptions in tax administration. The judgment concluded that the valuation method adopted by Revenue was not justified by law, as clarified in previous government communications and tribunal decisions. It emphasized the importance of certainty and stability in tax administration and rejected the re-valuation of goods done in the impugned orders, ultimately allowing the appeals and setting aside the impugned orders.