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TMI Blog2002 (5) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that as prices of the big packets for the same products for sale at the factory gate are available, the price of physician samples are to be worked out on pro rata basis for the samples as per Section 4(1)(b) of the Central Excise Act read with Rules 7 and 6(b) of Central Excise Valuation Rules, 1975. A show cause notice dated 2-1-1995 was issued for recovery of duty of Rs. 16,01,879/- during the period June to December, 1994 which was confirmed by the jurisdictional Assistant Collector vide his order dated 24-7-1995. The Commissioner (Appeals) upheld the order of the Assistant Collector vide his order dated 23-5-1996 and this gives rise to appeal E/1743/96-Bom. 2. Show cause notice dated 2-8-1995 was issued for recovery of duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present under Rule 7 of the Valuation rules. The Tribunal held that packages of medicines sold in wholesale market are comparable to packages supplied free of cost to physicians. That being so the broad scheme of Rule 6(b)(ii) i.e. costing method, will not apply, and that the broad scheme of Rule 6(b)(i) would only apply. The Tribunal held that for comparability it is not material that the samples are not sold for a price or that there was no profit motive in the transaction. Comparability, the Tribunal held, must be of the goods and not of the buyer or recipient of the goods. But any element of doubt due to disparity in the quantity of contents can certainly be neutralised by granting reasonable adjustment in that behalf." "The Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der. The appeals are rejected." 4. The appellants filed Civil Appeal Nos. 6588-6590 of 1997 before the Hon'ble Apex Court which by its order dated 30th August, 2001 [2001 (133) E.L.T. 532 (S.C.) set aside the final order of the Tribunal and remitted the matter to the Tribunal to be considered afresh for determination of the facts first and thereafter the law relevant to the issue. The Supreme Court direction is reproduced below : 'The question in these appeals relates to the valuation of physician samples for the purpose of excise duty. It has been the case of the assessee that the cost of the physicians samples is already included in the cost of the drugs that are for sale. In support of this contention a "cost certificate" was prepare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in accordance with the following formula as per para 7 of the DPCO : "R.P. = (M.C. + C.C. + P.M. + P.C.) x (1 + MAPE/100) + Excise Duty where, = R.P. retail price = M.C. material cost = C.C. conversion cost = P.M. cost of packing material =MAPE (Maximum Allowable Post-manufacturing Expenses) means all costs incurred by a manufacturer from the stage of ex-factory cost to retailing and includes trade margin and margin for the manufacturer and it shall not exceed 100% for indigenously manufactured scheduled formulations." "The Maximum Allowable Post-manufacturing Expenses (MAPE) as above allows the manufacturer as MAPE up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al packs of medicines. 9. What is to be seen therefore is whether in such a factual situation excise duty is chargeable on the actual removal of physician samples. The appellants relied upon the decisions of the Hon'ble High Court of Delhi in the case of Commissioner of Sales Tax, Delhi Administration v. Prem Nath Motors (P) Ltd. - 1979 (43) STC 52 (Del.) and Geo Motors v. State of Kerala - 2001 (122) STC 285 (Ker.) in respect of their submission that duty is not chargeable on the physician samples as this would amount to double levy which is not legally permissible. We have considered the decisions cited supra. In the case of Commissioner of Sales Tax, Delhi Administration v. Prem Nath Motors the Hon'ble Delhi High Court held that the wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian samples is sustainable and accordingly uphold the same. Penalty imposed for contravention of the Rules by removal of goods without payment of duty thereon is also sustainable and is upheld. 10. The appellants raised the plea that the physician samples were not marketable as Rule 65, Sub-rule 18 of the Drugs and Cosmetics Rules, 1945 prohibits sale or stockings by a licensee on the premises, of any drug intended for distribution for medical profession as free sample bearing a label on the container as specified in clause (ix) of sub-rule (1) of Rule 96 which prescribes overprinting of the words "Physician Samples - not to be sold" in support of this plea that physician samples are non-excisable as not marketable. He cites the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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