2023 (8) TMI 742 - AT - Central Excise

Method of Valuation - Physician Samples - contention of the department is that the valuation of the impugned goods should have been determined under Rule 4 of the valuation rules, 2000 based on the pro rate value of medicaments sold in the trade and valued under Section 4A - levy of penalty u/r 25 of CER - HELD THAT - The issue is no more res integra. The Hon,ble Supreme Court has already decided the issue in the case of COMMR. OF CENTRAL EXCISE CUSTOMS, SURAT VERSUS M/S SUN PHARMACEUTICALS INDS. LTD. ORS. 2015 (12) TMI 670 - SUPREME COURT , wherein it has been categorically held that valuation of physician samples is to be done as per Section 4(1)(a) of the Central Excise Act, 1944. The Appellant failed to follow the Board Circular dated 25.04.2005, which was available during the relevant period. Subsequently The Hon'ble Bombay High Court also decided the issue in the case of INDIAN DRUGS MANUFACTURER'S ASSOCN. VERSUS UNION OF INDIA 2006 (9) TMI 94 - HIGH COURT, BOMBAY . Accordingly, by following the decisions of the Hon'ble Apex Court, Bombay High Court and the Board Circulars cited above, We hold that the valuation of physician samples is to be done as per under Rule 4 of the valuation rules, 2000 based on the pro rate value of medicaments sold in the trade and valued under Section 4A. Accordingly, we uphold the demand of duty along with interest confirmed in the impugned order. Levy of penalty - HELD THAT - There were some contradicting decisions by the Tribunals during the relevant period and confusion prevailed regarding the correct method of valuation to be adoped for payment of duty on physician samples. However, the practice being followed by the Appellant was known to the department. Thus, there was no suppression or violation of any of the provisions of the Act involved and hence, no penalty imposable under Rule 25 of the Central Excise Rules. 2002. The demand of duty along with interest in the impugned order upheld - penalty imposed under Rule 25 of CER, 2002 is set aside - appeal disposed off.

Summary

Issues Involved:
The judgment deals with the demand of Central Excise Duty on Physician Samples and the valuation method to be applied for such goods.

Comprehensive details of the judgment for each issue involved:

1. Demand of Central Excise Duty on Physician Samples:
The department contended that the valuation of the goods should have been determined under Rule 4 of the Valuation Rules, 2000 based on the pro rate value of medicaments sold in the trade and valued under Section 4A. However, the Appellant cleared the goods by determining the value under Rule 8 of the Valuation Rules 2000. A Show Cause Notice was issued demanding differential duty, which was confirmed by the Assistant Commissioner and upheld by the Commissioner of Appeal-I. The Appellant challenged this before the Tribunal.

2. Valuation Method for Physician Samples:
The Appellant argued that the issue of valuation of Physician Samples was not settled as required under Rule 4 of the Valuation Rules, 2000. They contended that the lower authorities erred in assessing the duty based on the value of medicaments sold in trade and valued under Section 4A. They referred to a judgment of the Tribunal in the case of CCE Vs. Anglo French, where it was held that the valuation of free physician samples should be done under the cost construction method.

3. Board Circular and Legal Precedents:
The Authorized Representative supported the department's order, citing a judgment of the Hon'ble Supreme Court which held that the valuation of physician samples is to be done as per Section 4(1)(a) of the Central Excise Act, 1944. The Appellant failed to follow the Board Circular dated 25.04.2005. The Tribunal observed that the issue had been clarified by the Central Board of Excise and Customs and the Hon'ble Bombay High Court, leading to the conclusion that the valuation of physician samples should be done as per Rule 4 of the Valuation Rules, 2000.

4. Decision of the Tribunal:
The Tribunal held that the valuation of physician samples should be done based on the pro rate value of medicaments sold in the trade and valued under Section 4A, in line with the decisions of the Hon'ble Supreme Court and the Bombay High Court. The demand of duty along with interest was upheld, but the penalty imposed under Rule 25 of the Central Excise Rules, 2002 was set aside due to the confusion prevailing during the relevant period regarding the correct method of valuation.

In conclusion, the Tribunal upheld the demand of duty along with interest but set aside the penalty imposed, disposing off the appeal accordingly.