9911796707
TMI Blog2018 (5) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 arguments raised by both sides were similar to the arguments raised in the case of Blue Cross Laboratories. 2. Heard the Ld. Chartered Accountant. 3. Ld. AR relies on the impugned order. 4. We find that the issue has been examined in the case of Blue Cross Laboratories vide order No. A/85360/2018 dt. 28/02/2018 wherein identical submissions were examined. In the said decision following has been observed: 4. We have gone through the rival submissions. We find that it is 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 earlier, Rule 4 is a general rule and provides that the valuation of excisable goods that are not sold and delivered at the time and place of removal shall be based on the value of such goods sold and delivered at any other time nearest to the time of the removal of goods under assessment. The word such goods in Rule 4 clearly means that the goods in question must be similar or identical to and have same quality or character to the goods sold and delivered. In other words, what Rule 4 provides is that 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. res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable to captively consumed goods. There is no merit in this contention, because, firstly, 1975 Rules and 2000 Rules are not identical. Under Rule 6(b) of 1975 Rules, two methods were provided for valuation of captively consumed goods, namely valuation based on the value of comparable goods [Rule 6(b)(i)] and valuation based on the cost of production [Rule 6(b)(ii)] whereas Rule 8 of 2000 Rules provides for only one method of valuation based on the cost of production. Secondly, even under the 1975 Rules, the decisions of the Tribunal were to the effect that the physicians samples are liable to be valued by applying the value applicable to comparable goods 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, valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 valuation of such goods sold in the open market. 33. Assuming that the petitioners are right in contending that the valuation of the physicians samples cannot be determined under any of the specific rules, even then, as per Rule 11 the value of physicians samples has to be determined by using reasonable means consistent with the principles and the general provisions of 2000 Rules and Section 4(1) of the Act. As stated earlier, Rule 4 is the only general rule and, therefore, it is just and proper to hold that the valuation 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 cleare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee : Provided that in determining the value under this sub- clause, the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relevant factors and, in particular, the difference, if any, in the material characteristics of the goods to be assessed and of the comparable goods; (ii) if the value cannot be determined under sub-clause (i), on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods. 6. Even Rule 6 does not apply as that Rule is applicable only in those cases where such goods are either sold by the assessee in retail or are used or consumed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra). 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 assessment of physician samples can only be done on Section 4 of the Act and not under Section 4A. The issue in the present case is not the same. Here we are concerned with determination of value under Rule 11 of the Central Excise (Valuation) Rules. The said rule permits the tweaking necessary to arrive at a close estimate of the assessable value. 4.4 In the instant case it is seen that the physician samples are not sold by the appellants but are cleared free of cost. It is not the appellant s case that any of the Rule 4 to 10 of the Central Excise Valuation (determination 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 appar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 medicine whether in physician s sample or in retail pack do not at all change by virtue of the provisions of Note 5 of Chapter 30. Moreover, the medicine, having been already manufactured even before the packaging, could be consumed as such medicine even before its removal. Once taken out of the packages it was difficult to relate medicine from one package to the medicine from the other type of package, as was amusingly demonstrated in the court. The only adjustments in such cases would therefore be in the context of the proviso to sub-clause (i) of Rule 6(b), as discussed above. 4.6 The facts in the case of ZYG Pharma Pvt. Ltd. (supra) cited by the Ld. CA are different in so far as in the said case the appellants were not supplying the physician samples free of cost themselves. Ld. CA has relied on the decision of the Tribunal in the case of Centaur Pharmaceuticals Pvt. Ltd. 2016-TIOL-299- CESTAT-Mum. It is seen that the Tribunal in the said case failed to notice that the decision of the Hon ble Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
