2018 (5) TMI 604 - AT - Central Excise

Valuation of physician samples which are distributed free as part of marketing strategy, or as a gift or donation to doctors - Held that - the issue has been examined in the case of Blue Cross Laboratories 2018 (3) TMI 619 - CESTAT MUMBAI , wherein identical submissions were examined, and it was held that Since no transaction value available, the assessment cannot be done under Section 4 (1) (a) and the assessment has to be done under Section 4 (1) (b). The assessment cannot be done under Section 4A as the said goods are not marked with MRP. Demand in so far as relates to clearance of physician s samples is sustained - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Valuation of physician samples distributed free of cost.
2. Applicability of Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
3. Comparison with previous case laws and rules, including the Central Excise Valuation Rules, 1975.

Issue-Wise Detailed Analysis:

1. Valuation of Physician Samples Distributed Free of Cost:
The primary issue in this case revolves around the valuation of physician samples that are distributed free of cost as part of marketing strategies or as gifts to doctors. The appellant argued against the confirmation of the duty demand on these samples. The Tribunal examined whether these samples, which are not sold but distributed freely, should be valued under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

2. Applicability of Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000:
The Tribunal referred to the case of Blue Cross Laboratories and the decision of the Hon’ble High Court of Bombay in Indian Drugs Manufacturer’s Association, which held that Rule 4 of the 2000 Rules is applicable for the valuation of physician samples. The High Court stated, "Physicians free samples are admittedly not sold and delivered at the time and place of removal or at any time thereafter and, therefore, the valuation of physicians free samples have to be determined under Section 4(1)(b) of the Act read with 2000 Rules." Rule 4 provides that the value of excisable goods should be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of removal of goods under assessment.

The Tribunal noted that Rule 4 is a general rule applicable to goods not sold at the time and place of removal and that the valuation should be based on the value of similar goods sold and delivered at the nearest time. The Tribunal rejected the appellant's argument that Rule 4 cannot be applied, referencing the Hon’ble Apex Court's decision in Biochem Pharmaceuticals, which dealt with the Central Excise Valuation Rules, 1975, where a better alternative to Rule 4 was provided.

3. Comparison with Previous Case Laws and Rules, Including the Central Excise Valuation Rules, 1975:
The Tribunal distinguished the current case from previous rulings under the Central Excise Valuation Rules, 1975. It emphasized that the Central Excise Valuation Rules, 2000, are significantly different from the 1975 Rules. The Tribunal noted that in Biochem Pharmaceuticals, the Hon’ble Apex Court was not considering Rule 4 of the 2000 Rules but rather Rule 6 of the 1975 Rules. The Tribunal stated, "In the instant case, the assessing officer has chosen to apply Rule 4 read with Rule 11 of the Central Excise Valuation Rules in preference to Rule 8 read with Rule 11 of Central Excise Valuation Rules, 2000."

The Tribunal also referenced the decision of the Larger Bench in the appellant's own case, which supported the application of Rule 4 for valuing physician samples. The Tribunal concluded that the assessment should be done under Rule 4 read with Rule 11, as this provides a reasonable means consistent with the principles and general provisions of the 2000 Rules and Section 4(1) of the Act.

Conclusion:
The Tribunal sustained the demand related to the clearance of physician samples, holding that Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, read with Rule 11, is applicable for their valuation. The appeal was dismissed, and the judgment was pronounced in court on 26.04.2018.