2016 (8) TMI 622 - AT - Central Excise

Valuation - physician samples meant to be distributed free of cost - cleared by adopting assessable value based upon the costing structure but the Revenue opined on the basis of the pro rata cost of the regular samples - Held that - in view of the foregoing and in the absence of any positive evidence to show that the adoption of value of physician samples on the basis of cost structure was with any malafide intention and appreciating the fact that during the relevant period the said legal issue was answered by the higher authority in favour of the assessee and by appreciating that most of the pharmaceuticals manufacturers were adopting assessable value on the basis of cost data, we are of the view that no malafide intention can be attributed to the assessee so as to invoke the longer period of limitation. - Decided against the Revenue

Summary

Issues:
1. Valuation of physician samples for duty calculation.
2. Application of the extended period of limitation based on suppression.

Analysis:
1. Valuation of Physician Samples: The case involved a dispute regarding the assessable value of physician samples cleared by a pharmaceutical company. The Revenue contended that the value should be based on the pro rata cost of regular samples, invoking duty demand against the assessee. The Commissioner (A) had earlier granted relief on the basis of limitation, citing a previous show cause notice issued by the Revenue. The Tribunal noted that the issue of physician sample valuation had been addressed in various decisions and circulars, ultimately resolved by the Larger Bench in the Cadilal Pharmaceuticals Ltd. case. It was highlighted that there were differing views on the matter, indicating a legal interpretation issue. Citing legal precedent, the Tribunal concluded that the assessee could not be faulted for adopting a particular view when there were conflicting interpretations during the relevant period. The absence of evidence of malafide intent, coupled with industry practices and legal support for the assessee's position, led to the rejection of the Revenue's appeal.

2. Extended Period of Limitation: The Revenue sought to apply the extended period of limitation, alleging suppression by the assessee for clearing physician samples at a lower assessable value. However, the Tribunal found no merit in this argument. It emphasized that the legal issue of valuation was contentious, with support for the assessee's approach from higher authorities and prevalent industry practices. Citing the Continental Foundation Joint venture case, the Tribunal reiterated that in situations where there were conflicting views on a disputed issue, the assessee could not be penalized for choosing a particular interpretation. Given the lack of evidence of malafide intent and the legal landscape during the relevant period, the Tribunal rejected the Revenue's contention and upheld the relief granted by the Commissioner (A).

In conclusion, the Tribunal dismissed the Revenue's appeal, emphasizing the absence of malafide intent on the part of the assessee in valuing physician samples and highlighting the legal complexities surrounding the issue. The judgment underscored the importance of considering industry practices, legal interpretations, and absence of evidence of suppression when determining duty liability and applicability of the extended period of limitation.