2016 (12) TMI 834 - AT - Central Excise

Determination of Assessable value - Valuation - excise duty on the sample bottles under Rule 8 of the Valuation Rules - whether the value of Re. 1/- adopted by the appellant in respect of the small bottles of 60 ml of Lens Care Solution is the correct assessable or the value has to be raised, by adopting the value of the full commercial bottle of 120 ml - appellants contending that the bottles of Lens Care Solution cleared by the appellants were required to be valued based on the price of comparable goods, i.e., half of the price of 120 ml bottles meant for retail sale Rules. Held that - it appears that an identical issue came up before this Tribunal in the assessee s own case M/s Bausch and Lomb Eyecare India Pvt. Ltd. vs. C.C.E., Jaipur 2016 (6) TMI 510 - CESTAT NEW DELHI where it was held that The transaction is between the assessee and their distributors at the price charged by the assessee from the distributors and what the distributors ultimately did with these goods is extraneous and cannot be the relevant consideration to determine the valuation of the excisable goods - reliance was placed in the case of Sun Pharmaceutical Industries Versus Commissioner of C. Ex., Surat-II reported (2004 (12) TMI 501 - CESTAT, MUMBAI ) and it was held that inasmuch as the smaller packs were being sold by the assessee, though they were meant for further free distribution by the distributors, the price at which the same were being sold represents the transaction value and is required to be adopted as the assessable value in terms of the provisions of Section 4. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Valuation of lens care solution sample packs for excise duty calculation

Analysis:
The appeal was filed against the order of the Commissioner (Appeals) Customs & Central Excise, Jaipur, regarding the valuation of lens care solution sample packs for excise duty calculation during the period from July 2006 to September 2006 and April 2007 to September 2007. The appellant, engaged in the manufacture of Lens Care Solution, sold ReNu lens care solution in 120 ml bottles at a certain value and paid duty on it. However, during the same period, the appellant sold sample packs of 60 ml bottles to distributors at Re. 1 per bottle, including lens cases and instruction kits, as part of a marketing strategy. The Department objected to this practice, arguing that the goods were samples and not meant for sale. Subsequently, the appellant started paying excise duty on the sample bottles under Rule 8 of the Valuation Rules, i.e., cost of production plus 10%, under protest. The Department issued show cause notices alleging that the sample bottles should be valued based on the price of comparable goods, resulting in a lower assessable value than what the appellant had declared.

The Tribunal referred to a previous case involving a similar issue and observed that the value of the sample bottles should be based on the price at which they were being sold, even if they were meant for further free distribution by distributors. Citing a Supreme Court decision, the Tribunal emphasized that the transaction value between the assessee and the distributors should be considered for valuation, regardless of what the distributors did with the goods thereafter. Since the Revenue did not dispute the consideration received by the appellant from the distributors, the Tribunal concluded that the legal precedent established by the Supreme Court applied to the present case. Consequently, the impugned order was set aside, and the appeal was allowed, providing relief to the appellant in accordance with the legal position discussed.

In light of the legal principles outlined and the specific circumstances of the case, the Tribunal determined that the valuation of the lens care solution sample packs for excise duty calculation should be based on the transaction value between the appellant and the distributors, as per the relevant provisions of the Central Excise Act. The decision to set aside the impugned order and allow the appeal was made in line with established legal precedents and the absence of any evidence to support the Revenue's contentions regarding the valuation of the sample packs.