2019 (11) TMI 236 - AT - Central Excise

Valuation - physician s samples are not distributed to physicians by the appellant - period between January 2005 and January 2008 - HELD THAT - Taking recourse to section 4 of the Central Excise Act,1944, the appellant has adopted cost construction which is the appropriate method considering that the transaction is not one of sale. The issue decided in the case of M/S MEDISPRAY LABORATORIES PVT. LTD., M/S MEDITAB SPECIALITIES PVT. LTD., AND M/S OKASA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, GOA 2017 (2) TMI 309 - CESTAT MUMBAI where it was held that The valuation shall be determined on the basis of cost of raw material job charges including the profit of the job worker. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute regarding clearance of physician's samples between January 2005 and January 2008 - Valuation for duty liability - Appellant's contention on being a job-worker - Central Excise valuation rules - Applicability of section 4A of Central Excise Act, 1944 - Precedents cited by both parties - Tribunal's decision on valuation method.

Analysis:
The dispute in this appeal revolves around the clearance of physician's samples by M/s Kilitch Drugs (I) Ltd between January 2005 and January 2008. The central issue pertains to the valuation for duty liability, with duty amounting to ?38,77,711/- along with interest and penalty imposed by the original authority. The appellant argues that the physician's samples were manufactured as a job-worker using raw materials supplied by the principal and sent back to them, indicating a job-work arrangement. The central excise authorities insisted on valuation as per rule 4 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000, linking it to section 4 of the Central Excise Act, 1944, excluding section 4A. Citing various Supreme Court and Tribunal decisions, the appellant contests the applicability of section 4A.

The Authorized Representative, however, argues against the appellant's stance, citing contrary decisions that support the inclusion of section 4A in the valuation process. The key contention is whether the physician's samples, not intended for retail sale but for the principal-manufacturer, fall under section 4A. The appellant's adoption of the 'cost construction' method under section 4 is deemed appropriate due to the nature of the transaction not being a sale, challenging the opposing party's reliance on precedent cases. The Tribunal's decision in Medispray Laboratories Pvt Ltd case emphasizes that valuation should align with section 4 principles, especially in job-work scenarios, as per the Ujagar Prints case.

In the case of Zyg Pharma Pvt Ltd, a similar issue arose, leading to the rejection of the original order valuing physician's samples under Rule 4. The Tribunal consistently supports valuation under section 4 principles for physician samples manufactured by job-workers, rejecting contrary decisions like Hyva (India) Pvt Ltd and Indian Drugs Manufacturer's Association. Consequently, the impugned order is set aside, and the appeal is allowed, emphasizing the correct valuation method for physician's samples in such scenarios.