2005 (6) TMI 79 - AT - Central Excise

Valuation of Physician s Samples for free distribution among Doctors through Medical Representatives - Method to be followed - HELD THAT - Rule 6(b)(i) is the method of valuation on the basis of the price of comparable goods. The Commissioner (Appeals) has given 3 reasons for holding that the physician s samples and the goods cleared for wholesale trade are not comparable. Moreover the Hon ble Supreme Court in the of CCE Meerut v. Universal Glass Ltd. 2005 (3) TMI 122 - SUPREME COURT by the learned respondent has held that comparable goods under Rule 6(b) should be as far as possible identical goods. Moreover the CESTAT in Sun Pharmaceuticals 2004 (12) TMI 501 - CESTAT MUMBAI has held that the value of physician s sample in smaller pack cannot be increased pro rata to price of commercial pack by applying Rule 4 of the erstwhile CE Valuation Rules. In the same case valuation of smaller pack by applying Rule 6(b)(ii) was upheld. Even though Revenue in its appeal relied on two decisions of the CEGAT we are of the view that the physician s samples and the goods cleared on wholesale cannot be considered as comparable goods in view of the Supreme Court s decision that comparable goods should be as far as possible identical goods. The Commissioner (Appeals) has reached his conclusions on sound reasoning. Therefore we do not find any reason to interfere with the impugned order. The Revenue s appeal is rejected.

Summary

Issues involved: Valuation of Physician's Samples for free distribution among Doctors through Medical Representatives.

Analysis:

1. Valuation Methodology Dispute:
- The appeal filed by Revenue challenges the OIA regarding the valuation of Physician's Samples. The Commissioner (Appeals) favored Rule 6(b)(ii) of Central Excise Valuation Rules, 1975 over Rule 6(b)(i) for valuation. The Commissioner cited differences in packing, post-manufacturing expenses, and cost value of samples as reasons for the decision.
- Revenue contested the decision, arguing that the cost construction method should be a last resort. They referred to previous decisions by CEGAT which supported valuation based on comparable price of goods as per Rule 6(b)(i).
- The learned Consultant for the Respondent highlighted that physician's samples and wholesale products differ in various aspects, and Rule 6(b)(i) should only apply when goods are used in production. He also mentioned the Supreme Court's stance on comparable goods and the Tribunal's decision regarding the valuation of smaller packs of samples.

2. Comparability of Goods:
- The Tribunal emphasized the need for comparable goods to be as identical as possible, as per the Supreme Court's ruling. They also referred to a case where the valuation of physician's samples in smaller packs was upheld using Rule 6(b)(ii) instead of pro rata increase based on commercial pack prices.
- Despite Revenue's reliance on previous CEGAT decisions, the Tribunal concluded that physician's samples and wholesale goods are not comparable, aligning with the requirement for identical goods for comparison under Rule 6(b). The Commissioner's decision was upheld based on sound reasoning and the lack of grounds for interference.

In conclusion, the Appellate Tribunal rejected Revenue's appeal, upholding the Commissioner (Appeals)'s decision to value Physician's Samples using Rule 6(b)(ii) instead of Rule 6(b)(i). The judgment emphasized the need for comparable goods to be as identical as possible and highlighted the differences between physician's samples and wholesale products. The decision was supported by the Supreme Court's stance on comparable goods and previous Tribunal rulings regarding valuation methodologies for different pack sizes.