2016 (6) TMI 510 - AT - Central Excise

Determination of Assessable value - Valuation - excise duty on the sample bottles under Rule 8 of the Valuation Rules - whether the value of Re. 1/- adopted by the appellant in respect of the small bottles of 60 ml of Lens Care Solution is the correct assessable or the value has to be raised, by adopting the value of the full commercial bottle of 120 ml - appellants contending that the bottles of Lens Care Solution cleared by the appellants were required to be valued based on the price of comparable goods, i.e., half of the price of 120 ml bottles meant for retail sale Held that - An identical issue was considered by the Tribunal in the case of Sun Pharmaceutical Industries Versus Commissioner of C. Ex., Surat-II reported (2004 (12) TMI 501 - CESTAT, MUMBAI ) and it was held that inasmuch as the smaller packs were being sold by the assessee, though they were meant for further free distribution by the distributors, the price at which the same were being sold represents the transaction value and is required to be adopted as the assessable value in terms of the provisions of Section 4. We further find that on appeal against the said decision by the Revenue, the Hon ble Supreme Court in the case of Commissioner of Central Ex. & Cus, Surat Versus Sun Pharmaceuticals Inds. Ltd. (2015 (12) TMI 670 - SUPREME COURT ) observed that in the absence of any allegation made by the Revenue that the price at which the samples meant for free distribution were being sold by the assessee to distributors was not the sole consideration, such consideration fulfills the requirement of Section 4 (1)(a) of Central Excise Act, 1944. The fact that physician samples were further given free of cost by the distributors as no price was charged by the distributors, the case cannot be held to be not covered by the provisions of Section 4 (1) (a) of the Act. The said argument of the Revenue would be fallacious and wrong reason. The transaction is between the assessee and their distributors at the price charged by the assessee from the distributors and what the distributors ultimately did with these goods is extraneous and cannot be the relevant consideration to determine the valuation of the excisable goods. In the present case also, we find that the Revenue s entire case for enhancement of the price is based upon the fact that the distributors were giving the said packs free of cost, as a promotional scheme. Revenue has otherwise not doubted the fact that the consideration received by the assessee from the distributor is not the consideration or something more has flown back. In the absence of any such allegation much less any evidence, the ratio of law declared by the Hon ble Supreme Court is fully applicable. - Decided in favour of assessee

Summary

Issues:
1. Valuation of Lens Care Solution for excise duty based on sample packs sold at Re. 1/- to distributors for promotional purposes.

Analysis:
The case involved the valuation of Lens Care Solution for excise duty purposes based on sample packs sold at Re. 1/- to distributors for promotional activities. The appellants, engaged in manufacturing the product, sold 60ml sample bottles to distributors as part of a marketing strategy to boost sales. The distributors, in turn, offered these samples as freebies to customers to enhance their sales. The appellants contended that the Re. 1/- price represented the transaction value between them and the distributors, and the samples were never intended for direct retail sale to end customers.

The department objected to the excise duty payment based on Re. 1/- and issued a show cause notice proposing a higher valuation method for the sample packs. They suggested valuing the 60ml bottles at half the price of 120ml retail bottles. The Additional Commissioner of Central Excise upheld the duty demand, interest, and imposed a penalty on the appellants. Subsequently, the Commissioner of Central Excise (Appeals) rejected the appeal filed by the appellants, leading to the present appeal before the Tribunal.

The Tribunal analyzed the issue and referred to a previous case where the Supreme Court held that the price at which samples meant for free distribution were sold by the assessee to distributors represented the transaction value for valuation purposes. The Tribunal noted that the Revenue's argument for enhancing the price was solely based on the free distribution aspect by distributors, without questioning the consideration received by the appellants. As there was no evidence or allegation of any additional consideration beyond the Re. 1/- price, the Tribunal applied the Supreme Court's decision and allowed the appeal, setting aside the previous orders and providing relief to the appellants.