2009 (3) TMI 866 - AT - Central Excise

Stay/Dispensation of pre-deposit - Valuation (Central Excise) - Physicians samples and medicaments cleared for sale to buyers

Summary

Issues:
1. Demand of duty on medicaments cleared as physician's samples.
2. Applicability of Rule 4 of the Central Excise Valuation Rules to goods sold to buyers.
3. Interpretation of the Hon'ble High Court's judgment in Indian Drugs Manufacturer's Association v. CCE.
4. Basis of valuation for goods sold and delivered at the time and place of removal.
5. Prima facie sustainability of demand of differential duty.
6. Waiver of pre-deposit and stay of recovery regarding demand of duty and penalty.

Analysis:

1. The appellate tribunal noted that the lower authorities confirmed a demand of duty on medicaments cleared as physician's samples, with the appellants having paid a portion of the duty. The rest of the demand was on medicaments sold to buyers. The authorities applied Rule 4 of the Central Excise Valuation Rules to both physician's samples and goods sold, citing a High Court judgment.

2. The tribunal examined the High Court's judgment in Indian Drugs Manufacturer's Association v. CCE, which discussed the valuation of physician's free samples under Section 4(1)(b) of the Central Excise Act read with the Valuation Rules. The tribunal specifically referred to para (20) of the judgment, which highlighted that for goods sold and delivered at the time and place of removal, the basis of valuation should be the transaction value at each removal.

3. Considering the facts of the present case where the goods were sold to customers, the tribunal concluded that the payment of duty on the transaction value aligns with Section 4(1)(a) of the Central Excise Act. Consequently, the demand of differential duty under Rule 4 was deemed prima facie unsustainable, leading to the grant of waiver of pre-deposit and stay of recovery for the duty on goods sold and the corresponding penalty.

4. As the duty on free samples of medicaments had already been paid by the assessee, the tribunal also granted waiver of pre-deposit and stay of recovery for the penalty associated with the samples. Ultimately, the tribunal ruled in favor of the assessee, ordering the waiver of pre-deposit and stay of recovery in relation to the dues adjudged against them.