2019 (11) TMI 554 - AT - Central Excise

Method of Valuation - applicability of Rule 4 of the Central Excise Valuation Rules, 2004 or Section 4(1)(a) of the Central Excise Act, 1944? - Valuation - physician samples cleared by the appellant - sale of such samples on principal to principal basis to customers - clearance of physician samples manufactured on job work basis (loan licensee) to the principal manufacturer - appellants are determining the value of the medicaments sold to their customers by adopting the transaction value under Section 4(1)(a) of the Central Excise Act, 1944 when the goods were sold, but when it was manufactured on job work basis (loan licensee) valued the same by taking the cost of production 10% as provided in Rule 8 of the Central Excise Valuation Rules, 2000. Revenue disputed the method of valuation and alleging that the physician samples cleared by the appellant should have been valued in accordance with Rule 4 of the Central Excise Valuation Rules, 2000 by adopting the pro rata value of the trade pack of the medicaments. HELD THAT - This Tribunal following the ratio laid down by Hon ble Supreme Court in COMMR. OF CENTRAL EXCISE CUSTOMS, SURAT VERSUS M/S SUN PHARMACEUTICALS INDS. LTD. ORS. 2015 (12) TMI 670 - SUPREME COURT observed that whatever goods were sold by the appellant to their principal is correct transaction value in terms of Section 4. In both type of clearances in any circumstances, Rule 4 valuation shall not apply. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Valuation of physician samples manufactured on job work basis and sold on principal-to-principal basis.

Analysis:
The case involved appeals against orders passed by the Commissioner of Central Excise regarding the valuation of medicaments manufactured on job work basis and sold to customers. The appellants determined the value of goods based on transaction value under Section 4(1)(a) of the Central Excise Act when sold directly, but used cost of production + 10% under Rule 8 of the Central Excise Valuation Rules for goods manufactured on job work basis. The Revenue disputed this method and demanded differential duty along with interest and penalty. The Commissioner upheld the demand in some cases but set aside the penalty in others. The main issue was whether physician samples manufactured on job work basis and sold on principal-to-principal basis should be valued under Rule 4 of the Valuation Rules or Section 4(1)(a) of the Central Excise Act. The Tribunal, citing Supreme Court judgments, held that Rule 4 would not apply in cases where goods were sold to the principal, as in the present situation. The valuation should be based on the cost of raw material, job charges, and profit of the job worker. The Tribunal's decision was in line with the Supreme Court rulings on similar cases.

The Tribunal's decision was based on the precedent set by the Supreme Court in cases related to the sale of physician samples on principal-to-principal basis and the manufacture and clearance of physician samples on job work basis. Following the established legal principles, the Tribunal set aside the impugned orders and allowed the appeals with any consequential relief as per the law.