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2016 (7) TMI 298 - CESTAT NEW DELHI

2016 (7) TMI 298 - CESTAT NEW DELHI - 2016 (343) E.L.T. 1092 (Tri. - Del.) - Valuation - sale of medicines through their intermediaries - related parties - The supplies made to the said intermediaries were at a lower price than agreed upon between the appellant manufacturer with the Government department in terms of the rate contract entered between the two. The said intermediaries further raised invoices to various Government hospitals and sold the goods at the agreed upon prices. - Held that:- .....

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e, a part of the goods in respect of the same very contract cannot be allowed to be assessed on a different assessable value merely because the appellant have roped in an intermediary agency in between. - The appellant were required to discharge the duty liability at the contracted price in respect of the goods supplied by them to the Government hospitals, either directly or through M/s Anupam. - Demand of duty confirmed - Decided against the assessee. - Excise Appeal No. 189 of 2008- Ex .....

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r of the lower authority. First of all, we proceed to decide the assessee s appeal. 2. As per facts on record M/s Bright Drugs Industries Limited (hereinafter referred to as M/s BDIL) are engaged in the manufacture of various pharmaceutical products and P&P medicaments falling under chapter 30 of the Schedule to the Central Excise Tariff Act, 1985. The said appellant entered into rate contracts with the Maharashtra Government as also to some other Government agencies for supply of the medica .....

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routing the said movement of the medicines, through their intermediaries M/s Anupam Distributors (hereinafter referred to as M/s Anupam) as also through M/s S.S. Pharma. The supplies made to the said intermediaries were at a lower price than agreed upon between the appellant manufacturer with the Government department in terms of the rate contract entered between the two. The said intermediaries further raised invoices to various Government hospitals and sold the goods at the agreed upon prices .....

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BDIL and the duty was required to be paid on the value, which was being charged by said M/s BDIL from the Government hospitals. It was also seen that in some cases the medicines were being directly sent by the manufacturer to various Government hospitals and only the invoices were being raise by them in the name of M/s Anupam so as to enable them to further raised the invoices in the name of the Government hospitals. 4. Accordingly, the Revenue proceeded to recover the differential demand by way .....

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position is not in dispute. The said appellant M/s BDIL were manufacturer of medicament and had entered into purchase order / rate contract with the State of Maharashtra for supply of medicines to various hospitals/ Government institutions. The goods required to be supplied under the said contract were to be marked clearly as for Government supplies only, nor for sale on each package of the consignment. Instead of supplying the said medicines to the Government hospitals directly and raising i .....

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s Anupam to the appellant, the transaction value between the two, adopted as assessable value cannot be held to be not in accordance with law and as such the duty stands correctly paid by them on the said transaction value in terms of the provisions of Section 4 of the Central Excise Act. Detailing their arguments, it stands pleaded that in terms of the general practice in the medicine industries, the tenders are always filed in the name of the manufacturer as the Government agencies do not ente .....

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asis and in the absence of any allegation that the transaction value is not the only consideration received by the manufacturer, the ingredients of Section 4(1)(a) of the Central Excise Act stands satisfied, thus making no room for any differential demand of duty. 8. The issue required to be decided in the present case is as to whether the clearance of goods by M/s BDIL to M/s Anupam for further despatch of the same to the Government authorities in terms of the contract entered into between M/s .....

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y to Government departments and it is not open to sell the said goods in the market. The question which arises is as to whether M/s Anupam, though named as distributor, can actually be called as distributor or are having the status of an intermediary agency for the manufacturer for supply of goods to the Government agencies. In a common parlance, a distributor is a person, who is free to sell the procured goods in the market at a price to any person. In the present case the goods purchased by M/ .....

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re the services of the agency is required for recovery of the consideration of the medicines supplied to the Government hospitals, whether payments made to the recovery agent for such services would get deduction from the total assessable value of the medicines supplied directly by M/s BDIL. The answer would lie in an emphatical NO . M/s BDIL are also supplying medicines directly to Government hospital at the contracted price in which case the assessable value is admittedly the contracted price. .....

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io, the transaction being not on principal to principal basis. The fact that the goods stands supplied directly by the manufacturer and it is only the invoices which are initially being raised by them in the name of M/s Anupam, who are further raising the invoices in the name of the Government hospital is indicative of the cleverly adopting the fictitious route by the manufacturer. Even if viewed from another angle, the part of the goods which stand directly supplied by the manufacturer to the G .....

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pitals, either directly or through M/s Anupam. 9. The appellant have also assailed the demand on the point of limitation. By drawing attention to the fact that the demand for the period February, 1999 to March 2004 stand raised by way of show cause notice dated 30.08.2006 and thus beyond the normal period of limitation. It stands contended that the appellant have been filing the declaration and all other statutory documents with their jurisdictional Central Excise authorities and as such no supp .....

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goods directly, with intention to evade payment of duty, the malafide is writ large on the face. Merely because they were filing the returns and the invoices issued in the name of M/s Anupam, does not ipso facto lead to the disclosure of the marketing pattern adopted by the said M/s BDIL. It is only as a result of detailed investigation and scrutiny of the records which resulted in emergence of the real picture. As such, we find no reason to deny the Revenue the invocation of the extended perio .....

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ich was paid by them at the time of clearance of the goods and it is only enhanced excise duty, which already stands paid by them, which was collected from the Government agencies. The said plea of the assessee was not accepted by the original adjudicating authority by observing that the initial contract awarded to M/s BDIL was inclusive of duty and as such the subsequent amount collected by the assessee by way of supplementary / additional bills was on account of excise duty collected but not d .....

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se invoices there is no clear indication to show that the amounts collected represent excise duty only. b) As the contract with the Govt. Departments is an all inclusive price, any revision of price cannot be attributed to excise duty element alone when it is a fact that the duty payable at the time of clearance has been paid correctly by Appellant No. 1 (i.e. after Budget of 1999 & 2000). c) The revision of prices had been requested by the Appellant No. 1 on account of increase in excise du .....

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