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2025 (1) TMI 670 - AT - Central ExciseMethod of valuation - Section 4 or Section 4A of the Central Excise Act - Valuation of the 'physician samples' manufactured by the Appellant and sold on principal to principal basis to other pharmaceutical manufacturers/brand owners of such products - extended period of limitation - HELD THAT - The issue is no more res integra. The Hon ble Supreme Court in the matter of CCE, Surat Vs. M/s Sun Pharmaceutical 2015 (12) TMI 670 - SUPREME COURT , wherein it was categorically held that ' The transaction in question was between the assessee and the distributors. Between them, admittedly, price was charged by the assessee from the distributors. What ultimately distributors did with these goods is extraneous and could not be the relevant consideration to determine the valuation of excisable goods. When we find that price was charged by the assessee from the distributors, the show cause notice is clearly founded on a wrong reason. The case would squarely be covered under the provisions of Section 4(1)(a) of the Act. In view thereof, the Central Excise Rules would not apply in the instant case.' Extended period of limitation - HELD THAT - In the absence of any allegation regarding suppression of facts or fraud, invoking the extended period of limitation is also unsustainable. Conclusion - The valuation of physician samples sold on a principal-to-principal basis should be based on transaction value under Section 4, not Section 4A. The extended period of limitation requires evidence of fraud or suppression, which was absent in this case. Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED The core legal issue in this case revolves around the valuation of 'physician samples' manufactured by the appellant and sold on a principal-to-principal basis to other pharmaceutical manufacturers/brand owners. Specifically, the question is whether the transaction value adopted by the appellant for excise duty purposes, under Section 4 of the Central Excise Act, 1944, is appropriate, given that the samples are intended for free distribution to physicians. 2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework primarily involves the Central Excise Act, 1944, particularly Section 4, which deals with the valuation of excisable goods based on transaction value. The appellant argued that the transaction value should be accepted as per Section 4, supported by precedents such as the Supreme Court's decision in CCE, Surat Vs. M/s Sun Pharmaceutical Industries Ltd. Court's Interpretation and Reasoning The court considered the appellant's argument that the transaction value, as per the contract with other pharmaceutical manufacturers, should be the basis for excise duty calculation. The appellant cited several precedents where similar issues were adjudicated, emphasizing the applicability of Section 4 when a transaction value exists between the manufacturer and the distributor. Key Evidence and Findings The appellant provided evidence of contracts and transaction values agreed upon with other pharmaceutical manufacturers. The appellant also referenced a Board Circular clarifying that physician samples are not required to have a Maximum Retail Price (MRP) since they are not meant for sale. The court found these arguments and evidence compelling, noting the consistency with the Supreme Court's ruling in Sun Pharmaceutical Industries Ltd. Application of Law to Facts The court applied Section 4 of the Central Excise Act, 1944, to the facts, determining that the transaction value between the appellant and the distributors should be the basis for excise duty. The court rejected the department's view that the absence of a sale to end consumers invalidated the transaction value. Treatment of Competing Arguments The department argued that the valuation method was improper because the samples were intended for free distribution. However, the court found this reasoning flawed, emphasizing that the transaction between the manufacturer and distributor was the relevant consideration, not the ultimate distribution of the samples. Conclusions The court concluded that the transaction value adopted by the appellant was appropriate and in line with legal precedents. The appeals were allowed, and the court granted consequential relief to the appellant. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning The court cited the Supreme Court's reasoning: "The transaction in question was between the assessee and the distributors. Between them, admittedly, price was charged by the assessee from the distributors. What ultimately distributors did with these goods is extraneous and could not be the relevant consideration to determine the valuation of excisable goods." Core Principles Established The judgment reaffirmed the principle that the transaction value between a manufacturer and distributor is the appropriate basis for excise duty valuation, even if the goods are ultimately distributed for free. The decision clarified that the end-use of goods does not affect the applicability of Section 4 when a transaction value exists. Final Determinations on Each Issue The court determined that the appellant's method of adopting transaction value under Section 4 was valid. The appeals were allowed, and the court ordered consequential relief in accordance with the law.
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