1997 (3) TMI 206 - AT - Central Excise

Summary

Issues:
The determination of the assessable value of free samples supplied to physicians u/s Section 4(1)(b) of the Central Excises Act and Rule 6 of Central Excise (Valuation) Rules.

Summary:
The appellant, engaged in manufacturing pharmaceutical products, provided free samples to physicians alongside sales. Dispute arose regarding the assessable value of these samples. The appellant declared the value based on raw material, manufacturing cost, and profit. Notices were issued proposing demand of differential duty based on Rule 6 of the Rules. The appellant contested, but Assistant Collector confirmed demands, upheld by the Collector (Appeals), leading to the present appeals.

The learned Counsel highlighted discrepancies in the show cause notice reference to Rule 6, arguing for application of Rule 7 and Rule 6(b). The dispute centered on whether Rule 6(b)(i) or (ii) applied, considering the nature of physician samples as promotional tools. The assessable values of sale and sample packs were compared, showing variance even for identical contents, leading to the question of proper valuation under Rule 6.

Rule 6(b)(i) and (ii) were examined, emphasizing the need for comparability of goods. The Tribunal's decision in a similar case was referenced, supporting the relevance of quantity differences in determining comparability. Adjustments under Rule 6(b)(i) were deemed necessary based on reasonable factors, with a focus on goods rather than buyers or transactions.

The Assistant Collector's valuation method, using declared sale values with adjustments for quantity differences, was deemed appropriate. The appellant's argument for further adjustments due to free samples and lack of profit motive was rejected, emphasizing the application of Rule 6(b)(i) for valuation purposes.

Reference to a Collector's order in a different case was deemed irrelevant, as the broad scheme of Rule 6(b)(i) was upheld. Ultimately, no grounds for interference were found, leading to the dismissal of the appeals based on the valuation principles discussed.

In conclusion, the appeals were dismissed as the valuation principles under Rule 6(b)(i) were deemed applicable, and no further adjustments were warranted based on the nature of the goods and promotional intent of the free samples provided to physicians.