2017 (3) TMI 220 - AT - Central Excise

Valuation - special packing used for physician samples - packing cost to be included in assessable value or not? - Held that - physician samples are liable to duty on removal and that, in view of the special nature of packaging, costs must be computed of the sample including the special packaging cost for computing assessable value - this incremental cost has been subject to duty - in the absence of any reasonable evidence that this cost has not been included or adjusted in the duty paid on physician samples , appeal allowed - decided in favor of appellants.

Summary

Issues: Valuation of special packing used for physician samples for duty liability

Issue 1: Valuation of special packing for physician samples
The dispute revolves around the valuation of special packing used for 'physician samples' distributed free of cost, which was allegedly excluded from the assessable value adopted for clearance. The appellant argues that the value of special packing is included in the overall cost of production of the traded goods and that adopting a proportionate value is the most logical and appropriate method. The impugned order relied on previous tribunal decisions to hold that duty liability arises separately upon the removal of physician samples. It was emphasized that valuation should be computed in accordance with rule 7 of the Central Excise Valuation Rules, with due consideration to rule 6(b) after adjusting for quantity and other factors.

Issue 2: Comparison with previous tribunal decisions
The impugned order was criticized for not considering a specific decision by the Tribunal in a previous case, which had been remanded for further review. However, the impugned order merely recorded a finding of non-applicability based on the similarity of packing used in traded goods and samples in the cited case. The contention was raised that the samples provided in 'catch cover/catch boxes' were not used in the normal supply of goods, requiring this aspect to be considered in valuation under rule 7.

Issue 3: Application of Supreme Court decision
The appellant cited a Supreme Court decision emphasizing the application of Rule 6(b) for valuation, particularly regarding comparable goods and the discretion of the proper officer to determine value based on the best judgment. It was argued that physician samples, being comparable with traded goods, should be valued on a pro rata basis, while non-comparable samples should be valued on a cost basis. The Revenue's argument that samples were not comparable in terms of packing led to a discussion on costing for the computation of assessable value.

Conclusion
The Tribunal concluded that physician samples are liable to duty upon removal, and the costs, including special packaging costs, must be computed for assessing the value. However, it was noted that the duty had already been recovered on the incremental cost, and in the absence of evidence that this cost had not been included in the duty paid on physician samples, the impugned order was set aside, and the appeals were allowed.