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Commissioner of Central Excise, Goa Versus Cosme Remedies Ltd. And Vica-Versa

2016 (4) TMI 323 - CESTAT MUMBAI

Valuation of physician samples - Duty paid on the basis of 110% of the cost of production but revenue demanded duty at the value to be determined under rule 4 of the CER Valuation Rules - Revenue contended that applicant manufactured physician samples and distributes or sells for distribution free of cost - Held that:- the physician samples are not being distributed free of cost by CRL. They are being manufactured on the job work basis for the principal manufacturer and they are being sent back .....

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- Duty paid on the basis of 110% of the cost of production but revenue demanded duty at the value to be determined under rule 4 of the CER Valuation Rules - Applicant manufacturing physician samples for itself and selling the same to Cosmae Farma Laboratories - Held that:- the goods are not being distributed free of cost. By following the decision of Hon'ble Supreme Court in the case of CCE vs. Sun Pharmaceuticals Industries Ltd. [2015 (12) TMI 670 - SUPREME COURT] which squarely covers the pres .....

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The Cosme Remedies Ltd. (CRL) are manufacturers of medicaments. The CRL manufactures the medicaments along with the physician's samples which are not meant for sale. The CRL are not only manufacturing the products for themselves but also doing job work for others. CRL were assessing the value of the physician samples @110% of the cost of production and paying duty accordingly, during the period December 2005 to September 2006. The revenue relying on the CBE&C Circular No. 813/10-2005-CX .....

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he purpose of assessment differently for the physician samples manufactured by the CRL on their own behalf and those manufactured by the CRL as a job worker. The Commissioner (Appeals) observed as follows: "I see that there are two categories of clearances of physician samples which are manufactured on job work basis on behalf of M/s. Cosme Pharma Ltd., Bicholim and M/s. Cosme Farma Laboratories Ltd, Ponda and 2 nd is the physician samples manufactured by M/s. Cosme Remedies Ltd. on their o .....

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Laboratories Ltd., they cannot be treated as goods being distributed free. Yes, M/s. Cosme Farma Laboratories Ltd. may distribute these samples free, but a sale transaction exists between M/s. Cosme Remedies Ltd and M/s. Cosme Farma Laboratories Ltd. and in such a context the price under Section being clearly available and applicable, there is no need to come to the Valuation Rules. And in so far as these goods are concerned, I see that in the light of the fact that a sale does not exist, the de .....

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ermined 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 physician 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 physician samples must be value .....

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s are being cleared on job work basis to M/s. Cosme Farma Laboratories Ltd. and to M/s. Cosme Pharma Limited, the Valuation under Rule 4 is apt. The assessee has also contended that the job work value determination under Circular No. 619/10/02-CX based on the decision of Ujagar Prints Ltd. (1989 (039) ELT 0493 (SC) and Pawan Biscuits co. Ltd., Ltd. (2000 (120) ELT 0024 (SC) has not been followed. To this, I see that the Board Circular No.813/10/2005-CX dated 25/04/2005 is more apt in the present .....

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maceuticals Industries Ltd. - 2015 (326) ELT 3 (SC). The Hon'ble Supreme Court in the said decision had observed as follows: 10 As mentioned above, the 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 fre .....

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that price was charged by the assessee form 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. 11. As a result, we are of the opinion that the 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 .....

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the following decision of the Tribunal: a) Omin Protech Drugs Pvt. Ltd. CA No. 3338/2012 b) Softsule Pvt. Ltd. CA No. 1990-1992/2012 c) Mayer Health Care Pvt. Ltd. CA No. 6984/2009 d) Themis Laboratries Pvt. Ltd. CA No. 9876/2011 He argued that all the appeals of the revenue against the aforesaid order of the tribunal have been dismissed and consequently the aforesaid orders of the Tribunal have been upheld by the Hon'ble Supreme Court. 4. The learned AR relies on the order and the decision .....

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missions. 6. We find that there are various situations which arises while manufacturing physician samples. The manufacturer may be a manufacturing i) on job work basis for some principal manufacturer, both the trade packs and physician samples, and supplying both to the principal manufacturer, who in turn distributes physician samples free of cost, or sells to distributers for distribution free of cost. ii) on his own behalf, both the trade packs as well as the physician samples and a) distribut .....

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ng for itself and selling the same to Cosmae Farma Laboratories. The CRL was paying duty on these samples on the basis of the 110% of the cost of production. The demand notice seeks to demand duty at the value to be determined under rule 4 of the CER Valuation Rules. 6.2 The decision of the Hon'ble High Court of Bombay in the case of Indian Drugs Manufacturer's Association - 2008 (222) ELT 0022 (Bom) and the Larger Bench decision of this Tribunal in the case of Cadila Pharmaceuticals Ltd .....

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on the earlier decision of the Hon'ble Supreme Court in the case of M/s. Bal Pharma [2010 (259) E.L.T. 10 (S.C.)]. In the case of Bal Pharma the Hon'ble Court has reached the verdict on the following grounds. It is evident from the impugned order passed by the Customs, Excise and Service Tax Appellate Tribunal, Mumbai (for short, the Tribunal") in Appeal No. E/357/02 that while holding that samples have to be valued on pro rata basis, the Tribunal has relied on its earlier decision .....

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s not contested. 6.5 The case of Goa Antibiotics & Pharmaceuticals Ltd. 2014 (314) ELT 546 is distinguishable. In the said case the Tribunal has observed 4. We have considered the submissions of both sides. As per various case laws cited by the Ld. Advocate for the appellant this Tribunal has been consistently taking the view that in respect of physician's sample being manufactured by job worker and sold to the principal manufacturer, valuation is to be done as per Ujagar Print's jud .....

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ame. Even Ld. Advocate is claiming that they are declaring value as per CAS-4. CAS-4 valuation scheme is applicable for goods meant for capative consumption, which is not the case here. Thus the transaction between appellant and principal manufacturer cannot be considered as on principal to principal basis. Under the peculiar circumstances, the only way left is to assess the value based upon M.R.P. of similar goods after giving abatement as prescribed and on proportionate basis. This is what has .....

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that since the trade packs are assessed under Section 4A of the CEA, 1944, the samples should also be assessed under rule 4 of the of the Central Excise Valuation rules. It may be noted that the physician samples are not being distributed free of cost by CRL. They are being manufactured on the job work basis for the principal manufacturer and they are being sent back to the principal manufacturer. In the case of Omni Protech Drugs Pvt. Ltd. - 2011 (274) ELT 377 (Tri-Mum), the appellant was a job .....

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ransaction value arrived at as per the formula laid down by the Hon'ble apex Court in the case of Ujagar Prints (supra) i.e. cost of raw materials + conversion charges or the physician samples manufactured on job work basis are to be cleared as per Section 4A of the Act i.e less abatement on pro rata basis. The case law cited by the learned SDR are not relevant to the facts of the case as in those cases the manufacturers themselves manufacturing the physician samples and distributing the sam .....

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ue arrived at after including cost of raw materials + job charges as held by the Hon'ble Apex Court in the case of Ujagar Prints to the brand owner on principal to principal basis. Therefore, the case laws cited by the learned SDR are not applicable to the facts of this case. The ratio laid down by the Themis Laboratories Pvt. Ltd. (supra) is that if the manufacturer clearing the physician samples to the brand owner on transaction value, the transaction value is the assessable value. Therefo .....

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