1997 (7) TMI 319 - AT - Central Excise

Summary

Issues: Valuation of free samples under Central Excise Act and Valuation Rules

Issue 1: Valuation of free samples under Central Excise Act and Valuation Rules
The appellants, who manufacture patent or proprietary medicines, provided free samples to physicians and declared their value for assessment on a cost basis. The jurisdictional Assistant Commissioner determined that the prices of the samples should be calculated on a pro rata basis using Section 4(1)(b) of the Central Excise Act, 1944 along with Rules 7 and 6(b) of the Valuation Rules, 1975. The Commissioner (Appeals) agreed with the Assistant Commissioner but applied Section 4(1)(a) of the Central Excise Act instead. The Tribunal, referencing a previous decision, held that the principles of Rule 6(b) should be followed in cases like this under Rule 7 of the Valuation Rules. It emphasized that comparability should be based on the goods themselves, not the recipient, and reasonable adjustments may be made for any disparities in quantity. The Tribunal concluded that the broad scheme of Rule 6(b)(i) should apply for valuation, not Rule 6(b)(ii), and upheld the valuation based on the assessable value of comparable goods sold by the assessee or other manufacturers.

Analysis:
The primary issue in this case revolves around the valuation of free samples provided by the appellants to physicians under the Central Excise Act and Valuation Rules. The dispute arose when the jurisdictional Assistant Commissioner determined that the prices of the samples should be calculated on a pro rata basis using specific provisions of the Central Excise Act and Valuation Rules. The Commissioner (Appeals) supported this valuation but applied a different provision of the Central Excise Act. The Tribunal, citing a prior decision, clarified that the principles of Rule 6(b) should guide valuation under Rule 7 of the Valuation Rules in cases like this. It emphasized that comparability should focus on the goods themselves, not the recipient, and allowed for reasonable adjustments for any disparities in quantity. The Tribunal concluded that the broad scheme of Rule 6(b)(i) should be applied for valuation, rejecting the application of Rule 6(b)(ii) meant for valuation on a costing basis. It upheld the valuation based on the assessable value of comparable goods sold by the assessee or other manufacturers, thus resolving the valuation issue in favor of the authorities.