2020 (5) TMI 587 - AT - Central Excise

Valuation - manufacture and clearance of physician samples - sale on principal to principal basis - applicability of Rule 4 of the Central Excise Valuation Rules, 2004 or Section 4(1)(a) of the Central Excise Act, 1944 - 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 in the case of M/S MEDISPRAY LABORATORIES PVT. LTD., M/S MEDITAB SPECIALITIES PVT. LTD., AND M/S OKASA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, GOA 2017 (2) TMI 309 - CESTAT MUMBAI where it was held that the physician samples manufactured and sold by Okasa Pvt. Ltd. to their principal, the transaction is on principal to principal basis. Therefore, whatever goods were sold by the appellant to their principal is correct transaction value in terms of Section 4. 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 appeals were filed against an order passed by the Commissioner of Central Excise (Appeals), Mumbai-III regarding the valuation of medicaments manufactured by the appellants. The appellants manufactured medicaments on job work basis and on their own account, including physician samples sold to customers. The revenue disputed the valuation method, demanding recovery of differential duty. The appellants valued goods sold on their own account based on transaction value under Section 4(1)(a) of the Central Excise Act, 1944, but valued goods manufactured on job work basis using cost of production + 10% as per Rule 8 of the Central Excise Valuation Rules, 2000. The 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, 2000 or Section 4(1)(a) of the Central Excise Act, 1944. The Tribunal referred to judgments by the Hon'ble Supreme Court in relevant cases and held that Rule 4 valuation does not apply when goods are sold to the principal, irrespective of being physician samples. The valuation should be based on the cost of raw material + job charges, following principles laid down by the Supreme Court. The Tribunal set aside the impugned order and allowed the appeals, following the precedent established by the Supreme Court in similar cases.