2023 (9) TMI 56 - AT - Central Excise

Method of Valuation - Section 4 (1) (a) or 4 (1) (b) of Central Excise Act, 1944? - physician samples (P P medicaments) - HELD THAT - The issue to be decided is whether the physician samples (P P medicaments) are to be assessed under Section 4 (1) (a) or 4 (1) (b) of Central Excise Act, 1944. The discussion of the Hon ble Apex Court in the case of COMMR. OF CENTRAL EXCISE CUSTOMS, SURAT VERSUS M/S SUN PHARMACEUTICALS INDS. LTD. ORS. 2015 (12) TMI 670 - SUPREME COURT where it was held that What ultimately distributors did with these goods is extraneous and could not be the relevant consideration to determine the valuation of excisable goods. When we find that price was charged by the assessee from the distributors, the show cause notice is clearly founded on a wrong reason. The case would squarely be covered under the provisions of Section 4(1)(a) of the Act. The demand cannot sustain. The impugned orders are set aside. The appeals are allowed.

Summary

Issues Involved:
The issues involved in the judgment are the valuation of physician samples (P & P medicaments) under Section 4 (1) (a) or 4 (1) (b) of the Central Excise Act, 1944.

Valuation under Section 4 and 4A:
The appellant cleared products both for sales with MRP affixed and for free distribution to physicians as samples without MRP. The department contended that physician samples should also be assessed under Section 4A. The appellant argued that Section 4 and 4A are independent sections with specific legal principles. The appellant challenged the adoption of Rule 4 of the Central Excise Valuation Rules 2000 for valuation under Section 4A, stating it was highly erroneous and had no application.

Legal Principles and Applicability:
The discussion referred to the decision of the Hon'ble Apex Court in previous cases to determine the applicability of Section 4 (1) (a) or 4 (1) (b) of the Act. It emphasized that the transaction value between the assessee and distributors should be considered for excise duty valuation. The show cause notice's contention that since physician samples were given free of cost, the case was not covered under Section 4 (1) (a) was deemed fallacious. The Court held that the price charged by the assessee to the distributors was the relevant consideration for valuation, not the subsequent distribution by the distributors.

Decision and Conclusion:
The Court concluded that the case fell under the provisions of Section 4 (1) (a) of the Act, and the Central Excise Rules did not apply. Following previous decisions and legal principles, the demand for valuation under Section 4A was deemed unsustainable. The impugned orders were set aside, and the appeals were allowed with consequential reliefs. All appeals of the Revenue were dismissed based on the same issue.

Separate Judgement:
No separate judgment was delivered by the judges in this case.