2006 (9) TMI 305 - AT - Central Excise

Summary

Issues: Valuation of free samples for pharmaceutical drugs.

In this case, the Appellate Tribunal CESTAT, Mumbai heard an appeal against the order of the Commissioner (Appeals) regarding the valuation of free samples of pharmaceutical drugs. The Assistant Commissioner had levied duty on the free samples based on the value of comparable goods, disallowing deductions claimed for cash discount, quantity discount, freight, and insurance. The Commissioner (Appeals) ruled that abatements for discounts and expenses should be excluded for free samples as well.

The Tribunal noted that the physician samples were distributed for free, without any sale involved, leading to no transaction value for the product. Citing a previous order, the Tribunal emphasized that assessments should be based on the normal price of comparable goods. Conditional discounts like cash and quantity discounts applicable to sold goods cannot be extended to free samples. The Assistant Commissioner's finding of no insurance or freight involved in the samples supported the decision that deductions for these expenses were not applicable to free samples.

Ultimately, the Tribunal found the Commissioner (Appeals) erred in setting aside the Assistant Commissioner's order, deeming it not legally sound. Consequently, the Tribunal allowed the appeal, setting aside the Commissioner (Appeals) order and restoring the original order.

This judgment clarifies the valuation methodology for free samples of pharmaceutical drugs, emphasizing the need to base assessments on comparable goods' normal prices and excluding conditional discounts and expenses not applicable to free samples.