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TMI Blog2018 (3) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... not in dispute that the physician samples are cleared free of cost for distribution to the physicians as samples. Other than the packing of the goods, the goods are identical in nature in respect of quality. Even the packing is similar in many cases although the physician samples would contain and indication to that effect and would not contain the MRP." 4.1 In this regard, we find that the Hon'ble High Court of Bombay in the case of Indian Drugs Manufacturer s Association (supra) held as follows: 21. Physicians free samples are admittedly not sold and delivered at the time and place of removal or at any time thereafter and, therefore, the valuation of physicians free samples have to be determined under Section 4(1)(b) of the Act read with 2000 Rules. 22. Rule 4 of 2000 Rules is a general rule and it provides that the value of 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 the removal of goods under assessment. Rules 5, 6, 7, 9 & 10 of 2000 provide for the method of valuation in respect of goods sold and delivered at a place other than the place of removal or where the price is not the sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in all cases where the goods are not sold and delivered at the time and place of removal, its valuation is to be made by taking the value of such goods sold and delivered at the time nearest to the time and place of removal of the goods in question. 26. The above method of valuation contained in Rule 4 can be best understood by the following illustration. Suppose on 1st April, 2006 the goods manufactured by the assessee are sold and delivered to different parties from the factory gate/warehouse at 10.00 a.m., 12.00 noon and 4.00 p.m. respectively. If on the same day, similar goods are cleared otherwise than by sale at 1.00 p.m., then as per Rule 4, the value of goods cleared at 1.00 p.m. shall be determined by taking the value of the goods sold and delivered at 12.00 noon being the nearest to the time of the removal of the goods in question. 27. In our opinion, Rule 4 squarely applies to the clearances of physicians free samples, because, physicians samples are not clearances by way of sale and delivery at the time and place of removal and such goods meaning thereby goods similar or identical to physicians samples are also sold and delivered at the time and place of removal. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not the method based on the cost of production. Thirdly, as held by the Tribunal in the case of Medley Pharmaceuticals Ltd. (supra), Rule 4 and Rule 6(b)(i) of 1975 Rules being similar, the result would be same if Rule 4 is substituted by Rule 6(b)(i). In other words, the fact that rule similar to Rule 6(b)(i) of 1975 Rules is not to be seen in 2000 Rules would not preclude the revenue from valuing the physicians samples under Rule 4 especially when Rule 4 of the 2000 Rules is similar to Rule 4 of 1975 Rules. Therefore, valuation of physicians samples under Rule 4 of 2000 Rules would be reasonable and in consonance with the principles consistently followed in the last three decades. 30. Various decisions relied upon by the Counsel for the petitioners do not support the case of the petitioners because in none of those cases, the scope of Rule 4 of 2000 Rules has been considered. Decisions rendered under the 1975 Rules as stated above, in fact, do not support the case of the petitioners. The contention that Rule 8 is the only rule which deals with the instances where the goods are not sold and, therefore. Rule 11 with the spirit of Rule 8 have to be applied to the physicians s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of physicians samples be determined under Rule 11 read with Rule 4 and such a valuation would be reasonable and consistent with the principles and the general provisions of the Rules and the Act. The contention that the physicians samples must be valued under Rule 11 read with Rule 8 cannot be accepted because, Rule 8 applies to cases where the goods are not sold but are captively consumed whereas, goods similar to physicians samples are in fact sold in the open market and in fact physicians samples are not cleared for captive consumption. Hence, the valuation of physicians samples cannot be determined under Rule 11 read with Rule 8 of the 2000 Rules. 4.2 It is seen that the Hon'ble High Court of Bombay has dealt with all the aspects which have been raised by the Ld. CA. The Hon'ble High Court clearly held that Rule 4 of the Valuation Rules can be applied to the instant situation. Ld. CA has sought to assert that Rule 4 cannot be applied by relying on the decision of the Hon'ble Apex Court in the case of Biochem Pharmaceuticals Industries Ltd. It is seen that the Hon'ble Apex Court in the case of Biochem Pharmaceuticals was dealing with the situation where the Rule 4 of the Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him or on his behalf in the production or manufacture of other articles. In this scenario Rule 7 becomes applicable. As per which proper officer is to determine the value of such goods according to the best of the judgment. This Rule further mentions that for arriving on the best of his judgment he may have regard among other things to any one or more of the methods provided for in the earlier rules, namely, Rules 3 to 6. Rule 7 is as under : "RULE 7. If the value of excisable goods cannot be determined under the foregoing rules, the proper officer shall determine the value of such goods according to the best of his judgment, and for this purpose he may have regard, among other things, to any one or more of the methods provided for in the foregoing rules." 7. Thus, to arrive at valuation under this Rule, the proper officer may adopt the principles contained in Rule 6(b). Rule 6(b) deals with two methods : (1) In case these are comparable goods, the value of comparable goods produced or manufactured by the assessee, can be the basis and thus pro rata method can be applied; (2) In case aforesaid method can t be applied, then the second method can be resorted to viz. cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of price of excisable goods) Rules 2000 are directly applicable. Since no transaction value available, the assessment cannot be done under Section 4 (1) (a) and the assessment has to be done under Section 4 (1) (b). The assessment cannot be done under Section 4A as the said goods are not marked with MRP. The appellants are seeking to apply Rule 11 read with Rule 8 whereas Revenue is seeking to apply Rule 11 read with Rule 4 of the Central Excise Rules. It is apparent that neither Rule 4 nor Rule 8 of the Central Excise Valuation (determination of price of excisable goods) Rules, 2000 are directly applicable to the situation and both the rules have to be applied as reasonable alternatives with suitable adjustments in terms of Rule 11 of the Central Excise Valuation (determination of price of excisable goods) Rules, 2000. In the instant case, it is seen that identical goods different only in respect of size of packing and marking of MRP, are being assessed under Section 4A of the Central Excise Act and such comparable value after suitable adjustments can be adopted for the purpose of assessment of physician samples in terms of Rule 4 of Central Excise Valuation (determination of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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