2016 (11) TMI 13 - AT - Central Excise

Valaution - Job work /loan licensee - Physician samples - Held that - The duty demand in the present case to the extent of ₹ 28,31,993/- has been raised (i) on sale of physician samples to brand name owners; (ii) on clearances of physician samples on their own account and also as a job worker on loan licensee basis - it is pertinent to record that these samples are not distributed free as part of marketing strategy by the respondent but are supplied to the brand name owners as a loan licensee who in turn distribute them free to the physicians - in the case of sale of samples to brand owners on a principal basis, the transaction value merits acceptance. In respect of clearances as a job worker, valuation needs to be done on the basis of CAS4 certification - Appeal is disposed of by way of remand.

Issues:
Valuation of physician samples for excise duty - Application of CBEC Circular - Interpretation of transaction value - Distinction between free distribution and sale to brand owners - Valuation for job work basis - Compliance with CAS-4 standards - Re-quantification of duty demands.

Analysis:

Valuation of Physician Samples:
The appeal concerns the valuation of physician samples for excise duty purposes, focusing on clearances made by the assessee between 25.4.2005 to 31.10.2005. The dispute revolves around the treatment of physician samples sold to brand owners and those manufactured and cleared for free distribution to doctors. The Revenue contends that valuation should be done in accordance with CBEC Circular No.813/10/2005-CX, requiring proportional valuation based on the value of trade packs of the same medicine. The Revenue relies on precedents like the Hon'ble Bombay High Court's decision and other cases to support their stance.

Interpretation of Transaction Value:
The core issue is the interpretation of transaction value for physician samples. The Revenue argues that the value should be determined as per the CBEC Circular, emphasizing the application of Rule 4 of the Valuation Rules. However, the respondent's representative distinguishes the present case from the cited judgments, highlighting that the samples were not distributed free but sold to brand owners, necessitating valuation based on transaction value. The respondent cites previous tribunal decisions and the apex court's ruling in Sun Pharmaceuticals Industries Ltd. to support their position.

Compliance with CAS-4 Standards:
The respondent's compliance with CAS-4 standards for valuation is a crucial aspect. The Tribunal acknowledges the respondent's practice of paying duty based on CAS-4 standards for physician samples manufactured on a job work basis. The valuation for such samples is to be done in line with the principles of costing under CAS-4, as supported by the Ujagar Prints case. The Tribunal directs a re-quantification of the duty demands for clearances made as a job worker to ensure compliance with CAS-4 certification.

Re-Quantification of Duty Demands:
The Tribunal remands the matter back to the original authority for re-quantification of the duty demands. It notes the lack of clarity in the basis for arriving at the demands and the absence of supporting worksheets in the records. The re-quantification is to be conducted in alignment with the discussions and principles outlined in the judgment, emphasizing the acceptance of transaction value for samples sold to brand owners and CAS-4 standards for job work clearances.

In conclusion, the appeal is disposed of by way of remand for re-quantification of duty demands, ensuring compliance with CAS-4 standards and appropriate valuation principles for physician samples based on transaction value and job work basis.

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