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M/s. Biochem Pharmaceuticals Ind. Ltd. Versus Commnr. of Central Excise, Daman, Vapi

2015 (322) E.L.T. 808 (SC) - Valuation of free samples - samples are distributed free to the physicians - Held that:- CESTAT has accepted that the method of valuation would be `cost of production or manufacture of the goods'. To this extent the grievance of the appellant herein stands redressed.

Insofar as the present case is concerned, since substantial relief is already granted to the appellant in the rectification orders passed by the CESTAT, it is not necessary to deal with the re .....

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tesh Kumar, Adv., Mrs. Rashmi Malhotra, Adv., Mr. B. Krishna Prasad, Adv. ORDER The appellant herein is a Pharmaceutical Company which manufactures various kinds of medicines. Apart from selling the medicines in the market, some medicines are distributed to the physicians as samples for which the appellant is not charging any amount from those physicians. To put it otherwise, these are distributed free to the physicians. The question which has arisen in the present appeals is the valuation of th .....

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mples. He submitted, in the first instance, that even if these are exigible to excise duty, these samples have to be treated at zero cost because of the reason that the cost of manufacturing of these samples is already taken into account and added in the manufacture of those medicines which are sold in the open market. We find that this argument also does not have any merit as identical argument was rejected by this Court in Bharat Heavy Electricals Ltd. vs. CCE., Indore (2003 (154) ELT 10 (SC). .....

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of the decision of this Court in CCE v. Bal Pharma Ltd. This Court has upheld the conclusion of the Tribunal that the physicians' samples have to be valued on pro rata basis. The Tribunal, while arriving at the aforesaid conclusion, had relied upon its earlier decision in CCE, Calicut v. Trinity Pharmaceuticals (P) Ltd. which has been accepted by the Department. Therefore, we hold that physicians samples have to be valued on pro rata basis for the relevant period." Mr. Lakshmikumaran, l .....

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s that the said decision of the Tribunal was accepted by the Revenue, appeal of the Revenue was dismissed. There is no discussion of the Tribunal's decision in Trinity case. Because of this reason he took us to the judgment of the Tribunal in Trinity Pharmaceuticals Pvt. Ltd. and pointed out that in that case the Tribunal had adopted cost method and not pro rata method. Therefore some clarification on legal aspect is required. Since provisions of Section 4(i)(a) are not applicable, as per cl .....

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duced 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 .....

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nd 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." 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 .....

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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." 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) I .....

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fore, even while exercising his power under Rule 7 the proper officer can chose any of the aforesaid two methods prescribed in Rule 6(b) of the Rules. No doubt it is the discretion of the proper officer to determine the value as it is his best judgment which he has to exercise. However, the Rule also mentions that while exercising his best judgment, he has option to give regard to any of the methods, prescribed in the earlier rules. The words among other things' would indicate that regard ca .....

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n that the show cause notice dated 11.2.2000 issued in the said case, which covered the period from April 1998 to March 2000 and submission was the period from April 1998 to 30th November 1999, was time barred. This rectification application was allowed by the Tribunal vide order dated 4.1.2001 and the matter was remanded back to the Commissioner to decide the issue of limitation. We are informed by the learned counsel for the Revenue, on instructions that after remand, the Commissioner has deci .....

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