9911796707
TMI Blog2023 (9) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... . Six show cause notices, for overlapping periods between February 2009 and March 2011, proposing recovery of Rs. 7,64,414, along with applicable interest thereon, and for imposition of penalty under rule 25 of Central Excise Rules, 2002 came to adjudicated against the appellant herein. In appeal thereafter, it was held that '14. In cases where the samples are supplied to the manufacturers for free distribution, recourse has to be taken to Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, as clarified by the CBEC in their Circular No. 915/5/2010-CX dated 19.02.2010, as referred to supra. In such a case, the value has to be pro-rata MRP price of the final pack of the medicine, as made applicable by applying Rule 4 of Valuation Rules 2000. Reliance in this regard may also be placed on the ratio of the Hon'ble Supreme Court's judgment dated 22.09.2010 in the case of Bal Pharma - 2010 (259) E.L.T.10 (S. C). 15. However, in cases where the physician's samples are manufactured and sold on their own account, the valuation of such physician samples has to be done under Section 4 of the Central Excise Act, 1944. If the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be taken to the Valuation Rules. No specific rule covers such a contingency. Except Rule 8 all the other rules cover contingencies where sale is involved in some form or the other. Therefore, the residuary Rule 11 will have to be adopted along with the spirit of Rule 8. In other words, the assessable value would be 115% of the 'cost of production or manufacture' of the goods.' In further circular no. 813 dated 25th April 2005, it was, however, directed that 'In case of free samples, the value should be determined under Rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.' leading to writ proceedings before the Hon'ble High Court of Bombay in Indian Drugs Manufacturing Association v. Union of India [2008 (222) ELT 22 (Bom)] and the competency of the tax authorities to revise its stand in accordance with law was upheld and the correctness of lack of option for recourse to rule 8 of Central Excise (Determination of Price of Excisable Goods) Rules, 2000 approved thereby directing recourse to rule 4 therein which prescribed adoption of the 'price of goods sold for delivery at time nearest to the time of removal of the goods under asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This is clearly fallacious and wrong reason. The transaction in question was between the assessee and the distributors. Between them, admittedly, price was charged by the assessee from the distributors. What ultimately 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 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)(ii) of the Rules would not apply. Resultantly, Civil Appeal Nos. 3742-3744 of 2007 of the Revenue fail and are hereby dismissed.' which, it may be noted, pertains to the period prior to issue of circular that came up for challenge in the Hon'ble High Court of Bombay supra. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d free of cost to medical practitioners, patients and others. There is no sale involved. The cost of the Physicians Samples is eventually recovered in course of business from the buyer of medicines which are later on sold in normal course of trade, after the physician's samples have popularized the concerned medicines. Even though such goods are shown to be sold through distributors /wholesalers or returned back on sale basis to the principal manufacturer by the manufacturing loan licensee these sales are not genuine sales which are conducted at arm's length in the normal course of trade. The principal manufacturer has bought the physician samples from the manufacturing loan licensee i.e M/s Maneesh Pharma. Both the parties have interest in the business of one another. Similarly in the case of transactions between the principal manufacturer and his distributors/ wholesalers etc. such sales are not genuine sales as the buyer of physician samples has to ultimately distribute them free of cost- In this case the assessee has produced a statement of invoices to show that sale is involved. I find that all these invoices are issued to principal manufacturers who are the brand name ..... X X X X Extracts X X X X X X X X Extracts X X X X
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