2018 (6) TMI 985 - AT - Central Excise

Valuation - physician sample - MRP Based valuation or not? - Held that - The assessable value of physician sample which are manufactured on job work basis for others who may be distributing the same free of cost, has to be done on the basis of value arrived at in terms of decision of Hon ble Apex Court in the case of Ujagar Prints 1989 (1) TMI 124 - SUPREME COURT OF INDIA , where it was held that demand cannot be raised on the basis of MRP on such medicine - Demand on the basis of MRP cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Assessment of demand on physician samples cleared by M/s Softesule Pvt. Ltd.
- Valuation of physician samples sold to others for distribution free of cost.
- Valuation of physician samples manufactured on job work basis for others distributing free of cost.

Analysis:
1. Assessment of Demand on Physician Samples: The appellant, M/s Softesule Pvt. Ltd., challenged the confirmation of demand on physician samples they cleared. The learned Counsel argued that the samples were not distributed free of cost as they were manufactured by the appellant and sold to others who might distribute them for free. Citing legal precedents, the Counsel contended that the demand based on the Maximum Retail Price (MRP) was unsustainable. The Tribunal examined the case law, including the decision of the Hon'ble Apex Court in the case of Sun Pharmaceuticals Industries Ltd., emphasizing that the transaction between the appellant and distributors, where a price was charged, should determine the valuation under Section 4(1)(a) of the Central Excise Act. Consequently, the demand based on the MRP was deemed unsustainable.

2. Valuation of Physician Samples Sold to Others for Free Distribution: Referring to the case of Omni Protech Drugs Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-I, the Tribunal analyzed whether physician samples cleared by the appellant to the brand owner should be assessed under Section 4A of the Act or based on the transaction value arrived at as per the formula laid down by the Hon'ble Apex Court. It was established that when the manufacturer clears physician samples to the brand owner on a transaction value basis, the transaction value is the assessable value. Therefore, in this scenario, the appellant correctly valued the samples based on the cost of raw material inputs and job charges. The Tribunal set aside the impugned order, emphasizing that the assessable value should be determined following the principles established in the case law.

3. Valuation of Physician Samples Manufactured on Job Work Basis: The judgment also addressed the valuation of physician samples manufactured on job work basis for others who might distribute them free of cost. Relying on the decision of the Hon'ble Apex Court in the case of Ujagar Prints, the Tribunal concluded that the demand based on MRP was not sustainable in such cases. The assessable value of physician samples manufactured on job work basis had to be determined in accordance with the decision of the Hon'ble Apex Court. Consequently, the demand was set aside, and the appeals were allowed, highlighting the correct valuation methodology based on legal precedents.

In conclusion, the judgment provided a detailed analysis of the issues surrounding the assessment and valuation of physician samples, emphasizing the legal principles established by the Hon'ble Apex Court and relevant case law to determine the correct assessable value in different scenarios.