2012 (12) TMI 917 - AT - Central Excise

Valuation of physician s sample of medicines - Held that - Just because the actual transaction value is higher than MRP/abatement proceedings cannot be initiated for recovery of duty. Since the issue is covered by the decision of the Tribunal in the case of CADILA PHARMACEUTICALS LTD. Versus COMMR. OF C. EX. AHMEDABAD-II 2008 (9) TMI 98 - CESTAT AHEMDABAD - Decided in favour of assessee.

Summary

Issues:
1. Calculation of assessable value for physician's samples under Central Excise Act, 1944 based on MRP or actual transaction value.
2. Applicability of decision in Cadila Pharmaceuticals case regarding assessable value determination.
3. Imposition of penalties under Sec.11A of the Central Excise Act, 1944.

Issue 1: Calculation of Assessable Value

The appellant, engaged in manufacturing Pharmaceutical Medicaments, faced a dispute regarding the assessable value of physician's samples supplied free. The Revenue claimed that the actual transaction value should be considered instead of the MRP for determining the assessable value. The appellant argued that they followed the decision in the Cadila Pharmaceuticals case, where it was established that the assessable value of physician's samples should be based on the MRP on a pro-rata basis. The Tribunal found that the issue was settled in the Cadila Pharmaceuticals case, emphasizing that proceedings cannot be initiated for recovery of duty solely because the actual transaction value exceeds the MRP/abatement. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

Issue 2: Applicability of Cadila Pharmaceuticals Case

The appellant's contention rested on the interpretation of the Cadila Pharmaceuticals case, which determined the method for arriving at the assessable value of physician's samples. The appellant relied on this precedent to support their approach of using MRP on a pro-rata basis. The Tribunal concurred with the appellant, emphasizing that the decision in the Cadila Pharmaceuticals case was directly applicable to the present situation. By aligning with the Cadila Pharmaceuticals case, the Tribunal provided a clear directive on the methodology for calculating the assessable value, thereby ensuring consistency in the application of legal principles.

Issue 3: Penalties under Sec.11A of the Central Excise Act, 1944

In addition to the dispute over the assessable value, penalties under Sec.11A of the Central Excise Act, 1944 were imposed on the appellant. However, given the Tribunal's decision to set aside the impugned order and allow the appeal in favor of the appellant based on the Cadila Pharmaceuticals case, the penalties imposed were no longer sustainable. The Tribunal's ruling on the main issue effectively nullified the basis for imposing penalties, thereby relieving the appellant from the financial burden associated with the penalties under the Central Excise Act, 1944. Consequently, the appellant received consequential relief following the Tribunal's decision.

This detailed analysis of the judgment in the Appellate Tribunal CESTAT AHMEDABAD case highlights the key issues addressed, the legal principles applied, and the outcome in favor of the appellant based on the interpretation of relevant precedents and statutory provisions.