2019 (5) TMI 575 - AT - Central Excise

Valuation - Physician samples manufactured and sold on Principle to Principle basis to the brand name owner - HELD THAT - The appellant is clearing the physician samples on sale basis to their brand name owner and the transaction is of sale on Principle to Principle basis. Since, the physician sample is not ultimately sold, does not carry any MRP, in such a case, the valuation of the Physician sample, which is other than trade pack, if sold, should be governed by section 4 of Central Excise Act, 1944. Accordingly, the duty is required to be paid on transaction value. This issue has been considered time and again by this Tribunal and held that in case of Physician samples sold, the valuation should be done on transaction value in terms of Section 4 - demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues Involved: Valuation of Physician samples sold on Principle to Principle basis

Analysis:

The primary issue in this judgment revolves around the valuation of Physician samples that are manufactured and sold on a Principle to Principle basis to the brand name owner. The appellant argued that they are paying Excise Duty on the transaction value since the samples are sold on a Principle to Principle basis. On the other hand, the department contended that the valuation should be based on a pro-rata of Maximum Retail Price (MRP). The appellant relied on previous judgments such as Softsule Pvt. Ltd. Vs. CCE, Sun Pharmaceutical Industries Ind. Ltd., and C.C.E Vs Sun Pharmaceuticals Ind. Ltd. to support their argument.

The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order and cited the judgment of the Honorable Supreme Court in the case of Medley Pharmaceuticals Ltd. vs Commr. of Central Excise, Daman. After considering the submissions from both sides and examining the records, the Tribunal concluded that the appellant is indeed clearing the physician samples on a sale basis to their brand name owner, and the transaction is on a Principle to Principle basis. Since the physician samples are not ultimately sold and do not carry any MRP, the valuation should be governed by section 4 of the Central Excise Act, 1944. Therefore, the duty is required to be paid on the transaction value, and the department's contention of pro-rata MRP-based valuation was deemed incorrect. The Tribunal referred to its previous decisions and held that in the case of Physician samples sold, the valuation should be based on the transaction value in terms of Section 4. Consequently, the demand made by the department was deemed unsustainable, and the impugned orders were set aside, with the appeals being allowed. As the demand did not sustain, the Revenue's appeal to enhance the penalty invoking section 11AC was dismissed accordingly.