2023 (7) TMI 580 - AT - Central Excise

Method of Valuation - valuation of free samples of P and P medicaments - applicability of section 4A of the Central Excise Act, 1944 or rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 - HELD THAT - The issue before the Larger Bench in CADILA PHARMACEUTICALS LTD. VERSUS COMMR. OF C. EX., AHMEDABAD-II 2008 (9) TMI 98 - CESTAT AHEMDABAD was in respect of valuation of physician sample of medicines supplied free of cost. The operative part of views expressed by the majority was notwithstanding the non-availability of the normal sale price under Section 4(1)(a) of the Act, by reason of the goods being specified under Section 4A(1) making the retail sale price i.e. MRP as its deemed value, the appropriate rule governing the valuation of physician s samples would continue to be Rule 4. Thus, the contention of the appellant before the Supreme Court in Medley Pharmaceuticals 2011 (1) TMI 13 - SUPREME COURT that the free physician samples have to be assessed on the cost of manufacture plus 15% profit as contemplated under rule 8 of the 2000 Rules was not accepted by the Supreme Court - In the present appeal, the appellant has also determined the valuation under rule 8 of the 2000 Rules by adding 15% profit to the cost of manufacture. Such a determination of the assessable value has not been accepted by the Supreme Court. The Commissioner (Appeals), therefore, committed no illegality. Appeal dismissed.

Summary

Issues:
Valuation of physician samples for excise duty under Central Excise Act, 1944 and Central Excise Valuation Rules, 2000.

Issue 1: Valuation of physician samples under Central Excise Act, 1944 and Central Excise Valuation Rules, 2000

The case involved a manufacturer of P or P Medicines appealing against the order upholding the valuation of physician samples for excise duty under section 4A of the Central Excise Act, 1944. The appellant contended that physician samples, not meant for sale and not required to be affixed with MRP, should not be valued under section 4A. The department issued a show cause notice demanding excise duty based on the difference in valuation. The Assistant Commissioner upheld the demand under Rule 4 of Central Excise Valuation Rules 2000. The Commissioner (Appeals) also affirmed the decision, citing that even if samples are for marketing, once MRP is mentioned, valuation should be as per MRP under section 4A. The appellant's argument that valuation should be under Rule 11 read with Rule 8 of Central Excise Valuation Rules 2000 was rejected. The Tribunal referred to the decisions in Cadila Pharmaceuticals Ltd. and Medley Pharmaceuticals Ltd., where it was held that physician samples should be valued on a pro-rata basis. The appellant's method of valuation adding 15% profit was not accepted, leading to the dismissal of the appeal.

Conclusion:
The appeal challenging the valuation of physician samples for excise duty under the Central Excise Act, 1944 and Central Excise Valuation Rules, 2000 was dismissed based on the precedents and legal interpretations provided by the Tribunal and the Supreme Court.