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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 ..... 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 price of excisable goods) Rules, 2000. This does not amount to application of Section 4A of the Central Excise Act to physician samples. Appeal dismissed - decided against appellant. - Appeal No. E/1183/09 - Order No. A/92272 / 2017 - Dated:- 13-3-2018 - Shri Ramesh Nair, Member (Judicial) And Shri Raju, Member (Technical) Shri Mehul Jivani, C.A. for Appellant Shri Ajay Kumar, Addl. Commr. (A.R) for respondent ORDER Per : Raju This appeal has been filed by M/s. FDC Ltd. against confirmation of demand of duty on physician samples which are distributed free as part of marketing strategy, or as a gift or donation to doctors. The dispute relates to the valuation of such physician samples. The ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sides that Rule 5, 6, 7, 9 10 of 2000 Rules are not applicable to the physicians free samples because Rule 5, 6, 7, 9 and 10 apply to cases where the goods are sold whereas physicians samples are not sold. Therefore, the question is, which of the remaining Rule 4, 8 and 11 of the 2000 Rules would be applicable for the valuation of physicians free samples. 24. In our opinion, the physicians samples cannot be valued under Rule 8, because physicians samples are not cleared for use and consumption in the production or manufacture of other articles. Rule 8 applies to cases, where the goods are not sold but are cleared exclusively for use and consumption in the production or manufacture of other articles. Admittedly, the physicians samples are cleared for free distribution to the medical practitioners and are not cleared for use and consumption in the production or manufacture of other articles and, therefore, the method of valuation provided under Rule 8 cannot be applied for the valuation of physicians free samples. 25. Thus, the remaining rules, namely Rule 4 and Rule 11 are the only two rules that can be applied for the valuation of physicians free samples. As noted earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted because, Rule 4 is a general rule and does not contain any words which warrant such restricted meaning. The fact that Rule 4 permits adjustments in the value on account of the difference in the dates of delivery of such goods, if any, it cannot be inferred that Rule 4 is restricted to goods sold but not delivered at the time and place of removal. By use of the words if necessary in Rule 4, it is made clear that the adjustments shall be permitted wherever a necessary. In other words, Rule 4 would also cover cases where such adjustment is not necessary. To put it simply, there is nothing in Rule 4 to suggest that it applies only to goods sold but not delivered at the time and place of removal. 29. It was contended that the revenue, based on several judicial decisions of the Tribunal, has been valuing the physicians free samples for nearly three decades by applying the method applicable to captively consumed goods and, therefore, even under 2000 Rules the physicians samples are liable to be valued by applying the rule applicable to captively consumed goods. There is no merit in this contention, because, firstly, 1975 Rules and 2000 Rules are not identical. Under Rule 6( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsonance with the Act and the Rules made thereunder. 32. The argument of the petitioners that the physicians samples are distinct from the goods sold in the market is without any merit. As noted earlier, the physicians free samples must be similar or identical to the goods that are sold in the wholesale trade. If the physicians samples are not similar or identical to the goods that are sold in the wholesale trade, then the consequences will be disastrous, because, the physicians prescribe medicines based on the free samples supplied by the assessee. The fact that the physicians samples may be distributed in a different pack or in a different bottle would not make the physicians samples different from the goods sold in the open market. The difference in the size or quantity may entitle the assessee to some adjustment in the value, however, that would not make the physicians samples to be distinct from the goods sold in the open market. In other words, irrespective of the fact that the physicians samples are distributed in a pack different from the pack that is sold in the market, the valuation of the physicians free samples have to be determined under Rule 4 by applying the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Rules 3 to 5 have no application in such a case Rule 6(a) (b) reads as under : RULE 6. If the value of the excisable goods under assessment cannot be determined under Rule 4 or Rule 5, and - (a) where such goods are sold by the assessee in retail, the value shall be based on the retail price of such goods reduced by such amount as is necessary and reasonable in the opinion of the proper officer to arrive at the price at which the assessee would have sold such goods in the course of wholesale trade to a person other than a related person : Provided that in determining the amount of reduction, due regard shall be had to the nature of the excisable goods, the trade practice in that commodity and other relevant factors; (b) where the excisable goods are not sold by the assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles, the value shall be based - (i) on the value of the comparable goods produced or manufactured by the assessee or by any other assessee : Provided that in determining the value under this sub-clause, the proper officer shall make such adjustments as appear to him reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) and thus Revenue has apparently relied on the Rule 4 of the Central Excise Valuation Rules. The Hon ble High Court in the case of Indian Drugs Manufacturer s Association (supra) has clearly held that Rule 4 can read with Rule 11 can be applied to such a situation. It is seen that the Hon ble Apex Court in the case of Biochem Pharmaceuticals Industries Ltd (supra) has merely endorsed the decision of the lower authorities where the assessing officer had an option to choose between Rule 6 (b) (1) Rule 6 (b) (2) after giving reasons. In the instant case the assessing officer has chosen to apply Rule 4 read with Rule 11 of the Central Excise Valuation Rules in preference to Rule 8 read with Rule 11 of Central Excise Valuation Rules, 2000. It is seen that the appellant had relied on the decision of the Hon ble High Court of Gujarat in the case of Tuton Pharmaceuticals. However, the said decision has been passed without considering the decision of the Hon ble High Court of Bombay in the case of Indian Drugs Manufacturers Association (supra). In the said case the Hon ble High Court of Gujarat was concerned with virus of Section 4A of the Act. The Hon ble High Court held that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold, namely, free physician s samples on the basis of value of such medicines which are sold by the assessee, as provided by Rule 4. The only adjustment contemplated in that rule would be on account of the difference in the dates of delivery which can be made in cases where there is such difference in the delivery dates. However, when the physician s sample differs in quantity though identical in essential characteristics of the medicine, keeping in view Chapter Note 5 of Chapter 30, which includes labelling, repacking etc. in the manufacturing process, these nonetheless would be comparable goods within the meaning of Rule 6(b)(i) of the said rules and there would be no scope for adopting the costing method contemplated by sub-clause (ii) of sub-clause (b) of Rule 6 in respect of such physician s samples. The material characteristics of the goods are virtually identical because the identical medicine which is packed in the retail packs is packed in the physician s sample. Though manufacturing process gets an extended meaning by virtue of Chapter Note 5 of Chapter 30, it cannot be said that the medicine was not manufactured before it was packed. The material characteristics of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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