2016 (2) TMI 105 - AT - Central Excise

Valuation - free distribution of physician sample - whether valuation is to be done on pro rata value of the sale pack of the said physician samples of medicines - Held that - valuation of the physician sample of the medicines needs to be done on the basis of cost of production 15% as profit margin Levy of penalty - Held that - Since the issue of valuation of physician sample was being litigated during the relevant period, we re of the firm view that there is no necessity to visit the appellant with any penalty. Accordingly, penalty imposed by the lower authorities are set aside.

Summary

Issues: Valuation of physician samples cleared free of cost.

The judgment deals with an appeal concerning the valuation of physician samples distributed free of cost. The appellant cleared physician samples for free distribution by discharging duty based on the assessable value calculated using the costing method. The lower authorities determined that the valuation of the physician samples should be based on the pro rata value of the sale pack of the medicines. Both parties acknowledged that the Supreme Court's decision in Biochem Pharmaceuticals Ind. Ltd., 2015 (322) ELT 808 (SC) established that the valuation of physician samples provided free of cost should be based on the cost of production or manufacture of goods plus 15%. Consequently, the appeal was decided in favor of valuing the physician samples based on the cost of production plus a 15% profit margin. The lower authorities were instructed to calculate the duty liability and interest, with the appellant directed to make the necessary payments. The appellant had already paid the differential duty, and the lower authorities were directed to adjust these amounts along with any pre-deposited sums towards the duty and interest. Given that the issue of valuation was under litigation during the relevant period, no penalty was imposed on the appellant, and the penalties imposed by the lower authorities were set aside. The appeal was disposed of accordingly, with the operative part of the order pronounced in court on 04.12.15.

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