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TMI Blog2009 (4) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... ere initiated against the appellants on the ground that in terms of Board s Circular No. 813/10/2005-CX, dated 25-4-2005, the valuation of samples, which are distributed free, should be determined under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules. In terms of the said Rule, The value of the excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of removal of goods under assessment, subject, if necessary, to such adjustment on account of the difference in the dates of delivery of such goods and of the excisable goods under assessment, as may appear reasonable. In the present case, the assessee paid differential duty of Rs. 78,49,339/- under the cost construction method for the above mentioned period. In terms of Rule 4, the duty payable worked out to Rs. 1,50,91,849/-. Therefore, Show Cause Notice dated 07-5-2007 was issued to them for recovery of differential duty and for imposition of penalty. After giving a hearing, the Adjudicating Authority confirmed the demand of differential duty of Rs. 1,50,91,849/- and imposed a penalty of Rs. 15,00,000/- under Rule 25 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same method and paid the appropriate duty. (v) The learned Commissioner, in paragraph 7 of the Order, has held that he has not understood why the buyer has to buy the samples and then distribute the same free to the doctors and physicians. In the very same paragraph, he has held that the appellants have not given any reasons for such purchase and free distribution by the buyer. Such a finding is not reasonable due to the following :- (a) The Show Cause Notice has not raised any such cause to levy the duty on comparable price and hence one need not find out any such reason for the same; (b) At the time of personal hearing also, the learned Commissioner has not raised this point; and (c) Since he has not understood the business practice, it is not correct of confirming the demand. (vi) The learned Commissioner has held that since he has not understood why the buyer has to buy the goods and then distribute the same as sample, he has held that such sale is not a genuine sale . Just because he has not understood the business requirement of the buyer, it is wrong to conclude that such sale is not a genuine sale. (vii) The Show Cause Notice as well as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amples be done which are distributed free, as part of marketing strategy, or as gifts or donations? In case of free samples, the value should be determined under Rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. (xii) The above Circular is not applicable as the appellant had not distributed any goods either on his own or manufactured on loan licencee basis to the buyer free . The buyer of the goods has distributed it free of cost. However, when the said goods are cleared from the factory of the appellant, duty has been paid on the Transaction Value in respect of own goods and on the cost construction method as held by the Supreme Court s decision in Ujagar Prints case in case of loan licencee basis. (xiii) In view of the above, there is no justification for imposition of penalty. 5. The learned JCDR reiterated the following findings of the Commissioner : (i) The Commissioner, in para 7 of his findings, has stated that w.e.f. 08-1-2005, the pharmaceutical products falling under Chapter 30 of the Schedule to the Central Excise Tariff Act, 1985 are assessed to duty under Section 4A of the Central Excise Act. The pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CCE, Mumbai v. M/s. Godrej Industries Ltd. - 2006 (200) E.L.T. 348 (Tri.-Mumbai) wherein it has been held that MRP based valuation would be applicable in the case of goods notified under Section 4A of the Act irrespective of the fact whether they are meant for free distribution or not. (v) In para 11, he has held that the assessee have devised a plan/strategy in connivance with other person for under valuing the samples to avoid/evade payment of appropriate duty. Therefore, he has justified the imposition of penalty under Rule 25 of the Central Excise Rules, 2002. 6. We have gone through the records of the case carefully. The Show Cause Notice dated 07-5-2007 demands differential duty on the ground that for the Physician Samples cleared by the appellant, duty should be payable under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Para 2 of the Show Cause Notice states that the assessee had cleared the goods namely Physician Samples adopting assessable value under Rule 8. There is no mention here that these samples have been cleared free of cost. In any case, the Show Cause Notice has been issued on the presumption that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case therefore, when the sale price of the physician sample to the wholesale dealers is not impugned otherwise, the same has to be accepted under Section 4(1)(a). 6.2 In our view, the clarification dated 25-4-2005 of the Board will not be applicable because the said clarification relates to the valuation of samples which are distributed free as part of marketing strategy. In this case, the appellants who cleared the samples did not distribute them free but cleared on receipt of consideration. The Central Excise duty had been paid on the transaction value. Therefore, the differential duty demand by applying the Board s Circular is not correct. 6.3 The appellant manufactures Physician samples on job work basis and clears the same to the principal manufacturer. In this case, the raw materials for the manufacture are obtained from the principal manufacturer. The appellant receives job charges. While clearing them to the principal manufacturer who is their sister concern, duty is paid on the basis of the principles laid down in the Ujagar Prints case. In our view, this clearance also will not be covered by the said Board s Circular. 7. In view of the above, there is no me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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