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2016 (11) TMI 13 - CESTAT BANGALORE

2016 (11) TMI 13 - CESTAT BANGALORE - TMI - Valaution - Job work /loan licensee - Physician samples - Held that: - The duty demand in the present case to the extent of ₹ 28,31,993/- has been raised (i) on sale of physician samples to brand name owners; (ii) on clearances of physician samples on their own account and also as a job worker on loan licensee basis - it is pertinent to record that these samples are not distributed free as part of marketing strategy by the respondent but are supp .....

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er Smt. Ezhilmathi, AR For the Appellant Shri D. Aravind, CA, Mr. Mohammed Yousuf, AR For the Respondent ORDER Per V. Padmanabhan The present appeal is filed by Revenue against the order dated 30.7.2007 passed by the Commissioner (A), Bangalore. The respondent-assessee is a manufacturer of pharmaceutical products chargeable to duty of excise with reference to MRP under Section 4A of the Central Excise Act, 1944. The dispute relates to valuation of physician samples cleared by the assessee during .....

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ind, learned CA on behalf of the respondent. 3. It is the submission of the learned DR that physician samples have been manufactured and cleared on payment of duty by the respondent as follows: (i) Sold on contracted sale price to the brand owner as a loan licensee; excise duty stands paid on the transaction value. (ii) Physician samples manufactured and cleared to brand name owners on job work basis out of raw materials supplied by them; duty stands paid on the basis of cost of product ascertai .....

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r No.813/10/2005-CX dated 25.4.2005 in which it has been clarified that in the case of free samples, the value should be determined under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. In effect, this would mean that the value to be adopted for physician samples should be arrived at on proportionate basis on the basis of the value of trade packs of the same medicine. She further relied upon the decision of the Hon ble Bombay High Court in the case .....

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assessee s practice of paying duty on the basis of cost construction as per CAS-4 standards. 5. Learned CA, on the other hand submitted that the Hon ble Bombay High Court s judgment in the case of Indian Drugs Manufacturer s Association (supra) has been delivered in the contest of physician samples supplied free of cost to the doctors. He submits that this is not the controversy in the present appeal. The dispute in the present case covers physician samples manufactured by the respondent on thei .....

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6, in which it has been held that physician samples manufactured and sold to the brand owner are to be assessed at transaction value in line with the decision of the apex court in the case of Sun Pharmaceuticals Industries Ltd.: 2015 (326) E.L.T. 3 (S.C.). The issue is also settled in their favour in the cases of Softesule Pvt. Ltd.: 2011 (271) E.L.T. 445 (Tri.-Mumbai) and Mayer Health Care Pvt. Ltd.: 2009 (247) E.L.T. 488 (Tri.-Bang.). 6. The duty demand in the present case to the extent of  .....

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the basis of Rule 4 of the Valuation Rules. On this basis, the samples have to be valued proportionately to that of the trade packs (which are sold on MRP) of the same medicines. Revenue has also relied upon the decision of the Hon ble Bombay High Court and other cases. We have seen the judgments cited by the learned DR. The Hon ble Bombay High Court s judgment has been delivered on a challenge by the Indian Drugs Manufacturer s Association to the CBEC Circular dated 25.4.2005. The Hon ble Bomb .....

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tter stands settled by the apex court in the case of Sun Pharmaceuticals Indus. Ltd.: 2015 (326) E.L.T. 3 (S.C.) wherein the apex court has held as follows: 9. As per the aforesaid provision, it is the transaction value which is to be determined and on which excise duty is payable. 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 pri .....

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ely distributors did with these goods is extraneous and could not be the relevant consideration to determine the valuation of excisable goods. When we find 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. 11. As a result, we are of the opinion that the decision .....

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No. 2431-2432/2008 12. Since the same issue arises for consideration, following the aforesaid order, all the appeals of the Revenue stand dismissed. In cases where the samples have been cleared as a job worker, no transaction value is available for reference, consequently valuation needs to be done on the basis of Valuation Rules. However, it is pertinent to record that these samples are not distributed free as part of marketing strategy by the respondent but are supplied to the brand name owne .....

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