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2016 (12) TMI 524 - AT - Central ExciseValuation - Physical sample - Transaction value or MRP Basis - Rule 4 of Central Excise Valuation Rules, 2000 - Held that - when the excisable goods are sold and the transaction value is not tainted by any factor and is fulfilling the conditions of Section 4(1)(a), the tax liability has to be discharged in terms of such transaction value. We find that Section 4A will come into play when the physician samples are also covered under the said category for MRP based assessment - Since physician samples are not sold in retail and MRP is not fixed on the same and when the samples were sold by the appellant-assessee on a transaction value to the principal customer such transaction value should form basis of assessment. Regarding goods manufactured on loan licence basis where raw material and packing material were given by the principal brand owner, the appellant -assessee followed cost construction method to value the physician samples cleared by them to the principal manufacture - Held that - Hon ble Supreme Court in the case of Biochem Pharmaceuticals India Limited vs. CCE, Daman, Vapi 2015 (9) TMI 312 - SUPREME COURT held that the provisions of Rule 3 to 5 of the Valuation Rules, 1975 are not applicable. We note that Rule 4 of 1975 Rules and Rule 4 of 2000 Rules are identical. Further, the Hon ble Supreme Court also referred to the CESTAT decision which accepted valuation to be on the basis of cost of production or manufacture of the goods - Appeal allowed - decided in favor of the assessee.
Issues: Valuation of physician samples of medicines under Central Excise Valuation Rules, 2000
Issue 1: Valuation of physician samples manufactured using own raw material and packing materials The dispute centered around the valuation of physician samples of medicines manufactured using own raw material and packing materials. The appellant-assessee discharged duty based on transaction value indicated in the invoice, while the Revenue argued for MRP-based valuation similar to trade packs. The appellant contended that excisable goods should be taxed based on transaction value between unrelated parties, citing Tribunal decisions and Supreme Court rulings supporting this view. Issue 2: Valuation of physician samples made from raw material supplied by the brand owner Another aspect was the valuation of physician samples made from raw material supplied by the brand owner, where the appellant adopted 110% of the product cost for duty discharge. The Revenue insisted on using MRP-based valuation of comparable goods, challenging the cost-based approach of the appellant. Issue 3: Applicability of Rule 4 of Central Excise Valuation Rules, 2000 The main point of contention was the applicability of Rule 4 of the Valuation Rules to determine the value of physician samples cleared by the appellant. The Revenue argued for Rule 4 based on comparable goods, supported by a Board Circular, while the appellant maintained that transaction value should be accepted for duty assessment. Analysis: The Tribunal analyzed the transactions involving physician samples and emphasized that when excisable goods are sold with an untainted transaction value meeting Section 4(1)(a) conditions, tax liability should be discharged based on that value. The Tribunal referred to Supreme Court precedents and Tribunal decisions to support the acceptance of transaction value for duty payment. It highlighted that the requirement of MRP under Section 4A did not apply to physician samples not sold at retail, reinforcing the use of transaction value for assessment. Regarding samples manufactured on a cost basis, the Tribunal upheld the appellant's cost construction method for valuation, citing Supreme Court approval of such approaches and rejecting the Revenue's reliance on Rule 4. The Tribunal concluded that the original order applying Rule 4 for valuation of physician samples was unsustainable, leading to the allowance of appeals by the appellant-assessee and the rejection of Revenue's appeals against dropped demands. In summary, the Tribunal's detailed analysis focused on the proper valuation of physician samples under the Central Excise Valuation Rules, emphasizing the acceptance of transaction value for duty assessment and rejecting the Revenue's insistence on MRP-based valuation for comparable goods. The decision provided clarity on the applicable valuation methods for different types of physician samples, aligning with legal precedents and principles governing excise duty assessments.
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