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Commr. of Central Excise & Customs, Surat Versus M/s Sun Pharmaceuticals Inds. Ltd. & Ors.

2015 (12) TMI 670 - SUPREME COURT

Valuation - physician samples were given free of cost by the distributors and not by the manufacturer - Determination of 'transaction value' - Held that:- Assessee had put up the defence that since physician samples were not meant for sale by distributors but were to be given free of cost to the physicians, the assessee had charged lesser price. This statement of the assessee had not been doubted. The only reason in the Show Cause Notice given was that since the physician samples were given free .....

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that price was charged by the assessee from the distributors, the Show Cause Notice is clearly founded on a wrong reason. The case would squarely be covered under the provisions of Section 4(1)(a) of the Act. In view thereof, the Central Excise Rules would not apply in the instant case. - decision dated 10.11.2006 rendered by the CESTAT depicts the correct position of law and rightly holds that the case would be covered by the provisions of Section 4(1)(a) of the Act and in view thereof Rule 6(b .....

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ad, Adv., Mr. Alok Yadav, Adv., Mr. Somnath Shukla, Adv., Mr. Udit Jain, Adv., Mr. Praveen Kumar, Adv., Mr. Harish Pandey, Adv., Mr. Kedar Nath Tripathy, Adv., Mr. V. Sridharan, Sr. Adv., Mr. M. P. Devanath, Adv., Mr. Hemant Bajaj, Adv., Mr. Aditya Bhattacharya, Adv., Mr. Anandh K., Adv., Mr. T. D. Satish, Adv., Mr. Vikram S. Nankani, Sr. Adv. And Mr. Harish Pandey, Adv. ORDER Civil Appeal Nos. 3742-3744 of 2007 Civil Appeal No. 3263 of 2009 In these two sets of appeals, the assessee is M/s. Sun .....

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ed 27.02.2009 passed by the same West Zone Bench, Ahmedabad of the CESTAT. The dispute pertains to the 'transaction value' that is to be fixed in respect of goods sold by the SPIL to its distributors as physician samples. It is not in dispute that insofar as the assessee is concerned, it is selling these physician samples to its distributors for a price. However, since these are physician samples, the distributors in turn, supplied these samples to the physicians free of cost. Apart from .....

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d at different prices. It was alleged in the Show Cause Notice that since these physician samples were cleared for free distribution and not sold within the meaning of clause (a) of sub-section (1) of Section 4 of the Central Excise Act, 1944 (hereinafter referred to as 'Act') (as no consideration was involved), therefore, the value was required to be maintained as per clause (b) of sub-section (1) of Section 4 of the said Act. Thus, bringing the case out of Section 4(1)(a) of the Act an .....

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the physician sample pack were for free distribution. The defence of the assessee was not accepted and the demand in the Show Cause Notice was upheld. This order of the Assessing Authority was affirmed by the Commissioner (Appeals) as well. However, in further appeal to the CESTAT, vide its judgment dated 10.11.2006, CESTAT accepted the plea of the assessee and quashed the demand raised in the Show Cause Notice. Against this order, Revenue is in appeal for which Civil Appeal Nos. 3742-3744 of 20 .....

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butors did not sell the physician samples, it was not understood as to why distributors shall purchase the samples from manufacturer and then distribute the same free of cost to the physicians. According to him, a specific question was put to the counsel for the assessee in this behalf but no satisfactory answer was given or was forthcoming from records. Giving this reason, the Technical Member took the view that price was not the sole consideration and therefore, requirement of Section 4(1)(a) .....

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otice inasmuch as this was not even the case set up by the Department in the Show Cause Notice. As already noted above, the only ground which was mentioned in the Show Cause Notice was that since the goods had not been sold, the provisions of section 4(1)(a) of the Act could not be applied. We find that in the Show Cause Notice, the Department has, thus, accepted that no monetary consideration or any other consideration had been received by the assessee or the distributors from a doctor or conce .....

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as contended that the case was not covered under Section 4(1)(a). The CESTAT, therefore, in our opinion, has gone beyond the Show Cause Notice and on this ground alone, the judgment of the CESTAT dated 27.02.2009, which is the subject matter of Civil Appeal No. 3263 of 2009, warrants to be set aside. Civil Appeal No. 3263 of 2009 is, accordingly, allowed. We now advert to the central issue, viz., whether provisions of Section 4(1)(a) of the Act are applicable or not. Section 4 reads as under: - .....

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in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such pric .....

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uot; if - (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and distributor of the assessee, or a sub-distributor of such distributor; or (iv) they are so associated that they have interest, directly or indirectly, in the business of each other. (c) "place of removal" means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherei .....

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he factory; (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization ex .....

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