2004 (12) TMI 501 - AT - Central Excise

Valuation of physician samples Medicines - Demand - bar of limitation - Suppression of facts - HELD THAT - In this case the physician samples are being sold at a value. That value cannot be questioned otherwise. It is well settled by the Supreme Court in the case of CCE New Delhi v. Guru Nanak Refrigeration Corporation 2003 (3) TMI 100 - SUPREME COURT that the price declared by assessee correct although less than cost of manufacture of raw material manufacturing cost and manufacturing profit could get be section 4(1)(a) value. Following the same in this case therefore when the sale price of the physician sample to the wholesale dealers is not impugned otherwise the same has to be accepted u/s 4(1)(a). It is found that the Show Cause Notice is dated 22-8-2000 covering the period 1-8-1995 to 31-8-2000 invoking the proviso to clause of Section 11A(1). It is well settled that the proviso clause can be invoked only if there is material to support the ingredients required to invoke that clause. In this facts of this case the allegation of suppression of facts etc cannot be sustained as the fact that the appellant was manufacturing physician samples was fully known to the authorities and was declared as duty paying documents and clearance documents were regularly filed and the unit was audited from time to time. It was open to the authorities to seek clarification of the declarations made in list filed under rule 173C and to seek the costing details. That not having been done and it is now well settled that some positive act has to be found on part of the assessee in keeping away material evidence which would have enabled the assessing officers and the price list approving officers to arrive at incorrect value would only result in the invocation of the proviso clause and no such material is existing. Therefore it is found that the appellant have a good case on bar of limitation also. When we find that on merits and on limitation the duties cannot be sustained we find no reasons for invoking the penal clauses and imposition of penalties on all the appellants herein. Thus the orders on duty demand and penalties and other liabilities as arrived at are required to be set aside and appeals allowed. Ordered accordingly.

Summary

Issues involved: Determination of assessable value for physician samples of medicaments, imposition of duties and penalties, application of valuation rules, invocation of penal clauses, bar of limitation.

Assessable value for physician samples: The case involved duties and penalties imposed on a manufacturer for clearing physician samples of medicaments at prices lower than the pro rata price of commercial sale packs. The revenue authorities redetermined the values of physician samples, resulting in differential duty payment requirements. The Commissioner found discrepancies in the valuation under Rule 6 and upheld the application of Rule 4 for determining the value of physician samples. However, the Tribunal disagreed, stating that the conversion of packs from 10 tablets to 2 or 4 tablets amounts to manufacture, creating a new commodity, and thus cannot be considered comparable goods for valuation purposes.

Application of valuation rules: The Tribunal cited a Supreme Court ruling to support the acceptance of the sale price of physician samples to wholesale dealers under Section 4(1)(a), emphasizing that the declared price by the assessee should be accepted unless proven otherwise. Additionally, the Tribunal noted that the Show Cause Notice invoked the proviso clause of Section 11A(1) for alleged suppression of facts, but found that the authorities were aware of the manufacturing of physician samples, and no evidence of withholding material information was found. Therefore, the Tribunal concluded that the appellant had a strong case regarding the bar of limitation.

Penal clauses and limitations: Given the findings that the duties could not be sustained on merits and limitations, the Tribunal found no justification for invoking penal clauses and imposing penalties on the appellants. Consequently, the orders on duty demand, penalties, and other liabilities were set aside, and the appeals were allowed.

This judgment by the Appellate Tribunal CESTAT, Mumbai addressed issues related to the assessable value of physician samples of medicaments, the application of valuation rules, the invocation of penal clauses, and the bar of limitation. The Tribunal disagreed with the Commissioner's valuation methodology, emphasizing the manufacturing process's impact on determining comparable goods for valuation purposes. Additionally, the Tribunal upheld the acceptance of the sale price of physician samples under Section 4(1)(a) and found no grounds for invoking penal clauses due to limitations and lack of evidence of suppression of facts. Ultimately, the orders on duty demand, penalties, and other liabilities were set aside, and the appeals were allowed.