2002 (5) TMI 156 - AT - Central Excise

Summary

Issues:
1. Valuation of physician samples for excise duty.
2. Inclusion of cost of physician samples in sale price.
3. Chargeability of excise duty on physician samples.
4. Marketability of physician samples.

Issue 1: Valuation of physician samples for excise duty:
The case involved the appellants manufacturing patent medicines and clearing physician samples. The dispute arose regarding the valuation of physician samples for excise duty purposes. The department contended that prices of larger packets for the same products should be used to determine the value of physician samples. The Tribunal, in an earlier order, held that Rule 6(b) principles should be followed while determining the value under Rule 7 of the Valuation Rules. The Tribunal emphasized comparability of goods rather than the buyer or recipient. The Tribunal concluded that the value should be determined under Section 4(1)(b) and Valuation Rules 7 and 6(b).

Issue 2: Inclusion of cost of physician samples in sale price:
The appellants argued that the cost of physician samples was already included in the sale price of commercial packs of medicines. They provided a certificate from their Cost Accountant certifying that the cost of physician samples was part of the manufacturer's promotional expenses. The Supreme Court directed a fresh consideration of facts and relevant law. The appellants substantiated their claim with additional evidence, including an affidavit from the Company Secretary, showing that the cost of physician samples was included in the post-manufacturing expenses of the medicines.

Issue 3: Chargeability of excise duty on physician samples:
The appellants contended that duty on physician samples would amount to double levy, citing decisions from Delhi and Kerala High Courts. However, the Tribunal relied on a previous decision regarding warranty replacements to uphold the duty demand on physician samples. The Tribunal held that the duty demand and penalty for contravention of rules were sustainable.

Issue 4: Marketability of physician samples:
The appellants raised the plea that physician samples were non-excisable as they were not marketable due to specific rules in the Drugs and Cosmetics Rules, 1945. The Revenue objected, stating that this issue was beyond the scope of the Supreme Court's remand order. The Tribunal upheld the objection, ruling that the appellants could not raise the plea of marketability. Consequently, the duty demand and penalty were upheld, and the appeals were rejected.

This detailed analysis of the judgment highlights the key issues surrounding the valuation, inclusion of costs, chargeability of excise duty, and marketability of physician samples, providing a comprehensive understanding of the legal complexities involved.