2005 (9) TMI 522 - AT - Central Excise

Summary

Issues Involved:
1. Valuation of Physician Samples.
2. Applicability of Rule 6b(ii) vs. Rule 6b(i) of Central Excise Valuation Rules.
3. Invocation of larger period of limitation for demand.
4. Dismissal of appeal as time-barred.
5. Double taxation concern.
6. Penalty imposition under Rule 173Q.

Issue-wise Detailed Analysis:

1. Valuation of Physician Samples:
The core issue across all appeals pertains to the valuation of physician samples distributed free by pharmaceutical companies to medical practitioners. The valuation method has evolved over time, with the initial preference for the 'Cost Construction' method under Rule 6b(ii) of the Central Excise Valuation Rules, 1975. The Department later questioned the applicability of Rule 6b(ii) when the value of comparable goods was available, arguing that Rule 6b(i) should be used instead. With the introduction of the Central Excise Valuation Rules, 2000, the CBEC Circular No. 643/34/2002-CX dated 1-7-2002 clarified that the value of physician samples should be determined under Rule 11 read with Rule 8, setting the value at 115% of the cost of production.

2. Applicability of Rule 6b(ii) vs. Rule 6b(i) of Central Excise Valuation Rules:
In Appeal No. E/587/2000, the Commissioner (Appeals) initially directed the Assistant Commissioner to use Rule 6b(ii) for valuation, but later contradicted this by agreeing with the Department's view that Rule 6b(i) should apply. The Tribunal noted that the Commissioner (Appeals) should not have entertained the Department's appeal against his own earlier order, which had become final. The Tribunal set aside the Commissioner's order on this ground without delving into the merits.

3. Invocation of Larger Period of Limitation for Demand:
In Appeal No. E/1820/99, the appellants argued that there was no suppression of facts as they had been regularly filing price lists and using the cost construction method for valuation. The Tribunal found no suppression and held the demand time-barred as it was issued beyond six months from the date of payment of duty. The appeal was allowed on the ground of limitation.

4. Dismissal of Appeal as Time-barred:
In Appeal No. E/718/02, the Commissioner (Appeals) dismissed the appeal as time-barred, noting that it was filed 27 days late without sufficient justification. The Tribunal upheld this dismissal, agreeing with the Commissioner that the reasons for the delay were flimsy.

5. Double Taxation Concern:
In multiple appeals, the appellants contended that valuing physician samples based on the proportionate value of trade packs would result in double taxation, as the cost of samples was already included in the trade packs. The Tribunal rejected this argument, citing the precedent set in the Cross Land Research Laboratory case, which upheld the Department's method of valuation on a pro-rata basis.

6. Penalty Imposition under Rule 173Q:
The Tribunal found merit in the appellants' plea that no penalty should be imposed under Rule 173Q in cases involving debatable issues of valuation. Consequently, penalties were set aside in appeals where they had been imposed.

Conclusion:
The Tribunal's judgments consistently upheld the Department's approach to valuing physician samples based on comparable goods or pro-rata basis, rejecting the cost construction method unless explicitly justified. The Tribunal also emphasized procedural fairness, as seen in its stance on the time-barred appeal and the improper reconsideration of final orders. Penalties were generally set aside in recognition of the contentious nature of the valuation issues.