2018 (9) TMI 558 - AT - Central Excise

Method of Valuation - physician sample sold to the brand owner - to valued u/s 4 or u/s 4 A of Central Excise Act 1944? - Held that - The fact is not under dispute that the appellant had initially paid the duty on free sample on proportionate of value under section 4 A of the trade pack. Since the physician s samples were sold by them to the brand owner by raising the sale invoice the Excise duty should have been paid on the transaction value. The proportionate of section 4A is applicable only in a case where the physician sample are not sold and cleared free of cost which is not the case here. The duty should have been paid under section 4 - the differential duty is rightly refundable in accordance with the law - Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Correct valuation under section 4 vs. section 4A of the Central Excise Act 1944 for physician samples sold to brand owner.
2. Application of section 4(1)(a) for duty calculation based on transaction value.
3. Exemption of physician samples from MRP requirements under DPCO, 1995.
4. Interpretation of relevant legal provisions for excise duty calculation.
5. Consideration of unjust enrichment and time bar for refund claim.

Issue 1: Correct Valuation under Section 4 vs. Section 4A
The case involved a dispute over the correct valuation method under the Central Excise Act 1944 for physician samples sold to the brand owner. The appellant initially paid duty based on the value under section 4A but later claimed a refund, arguing that duty should have been paid on the transaction value under section 4. The Commissioner (A) allowed the appeal, stating that duty should indeed have been paid under section 4 for samples sold to the brand owner. The Tribunal upheld this decision, emphasizing that section 4A applies when samples are not sold, while section 4 is applicable when samples are sold, as in this case.

Issue 2: Application of Section 4(1)(a) for Duty Calculation
The Tribunal considered the application of section 4(1)(a) for duty calculation based on the transaction value when samples are sold to third parties at arms length. It was noted that the duty should be charged on this value, as long as it is genuine and not influenced by any extra commercial considerations. The Tribunal referenced a previous case to support this interpretation, highlighting that the duty calculation should be based on the transaction value when physician samples are sold in wholesale. The Tribunal affirmed that the duty had been correctly paid by the appellant under section 4(1)(a) and dismissed the need to invoke Valuation Rules under section 4(1)(b).

Issue 3: Exemption of Physician Samples from MRP Requirements
The Tribunal analyzed the exemption of physician samples from Maximum Retail Price (MRP) requirements under the Drugs (Prices Control) Order, 1995 (DPCO, 1995). It was established that physician samples are not intended for retail sale, and therefore, there is no legal obligation to print an MRP on them. Consequently, the physician samples were deemed to fall outside the purview of section 4A of the Central Excise Act, 1944. The Tribunal's decision was supported by the provisions of the DPCO, 1995, which necessitate compliance with retail sale price declaration only for goods intended for retail sale.

Issue 4: Interpretation of Relevant Legal Provisions
The Tribunal thoroughly examined the legal provisions governing the valuation and duty calculation for physician samples under the Central Excise Act, 1944. It emphasized the distinction between sections 4 and 4A, highlighting that the correct valuation method depends on whether the samples are sold or not. The Tribunal also referenced a previous case to reinforce the interpretation that duty should be charged based on the transaction value when physician samples are sold in wholesale. The decision underscored the importance of adhering to the provisions of the Act and relevant regulations in determining excise duty liabilities.

Issue 5: Consideration of Unjust Enrichment and Time Bar
The Tribunal acknowledged a casual mention of section 12B in the show cause notice regarding unjust enrichment, indicating that the refund claim might be subject to this bar. While the adjudication order did not delve deeply into this aspect due to the rejection of the refund on merit grounds, the Tribunal highlighted the need for the Assistant Commissioner to examine this issue further. The Tribunal upheld the decision to keep the matter of unjust enrichment and time bar open for detailed scrutiny by the Adjudicating authority, ensuring a comprehensive assessment of the refund eligibility post the Tribunal's ruling.