TMI Blog2006 (8) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... the wholesale dealers was not impugned, the same was required to be accepted under Section 4(1)(a) of the Act. Therefore, this decision though projected to be laying down proposition of law contrary to the ratio of Cheryl Laboratories (P) Ltd. supra, in no way advances any proposition inconsistent with the one adopted in Cheryl Laboratories (P) Ltd., Charak Pharmaceuticals and Crosslands Research Laboratories Ltd., and therefore cannot be of any assistance to the assessee. Where the medicines put in the retail packs and free physician's samples are identical in the material characteristics as well in quantity, then there would be no scope for any doubt in working out the value of the excisable goods not sold, namely, free physician's samples on the basis of value of such medicines which are sold by the assessee, as provided by Rule 4. The only adjustment contemplated in that rule would be on account of the difference in the dates of delivery which can be made in cases where there is such difference in the delivery dates. However, when the physician's sample differs in quantity though identical in essential characteristics of' the medicine, keeping in view Chapte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessable value of various physician samples of the medicines to be lower than the value charged for the clearance of normal sales packs of identical medicines, and objected to the assessee's resorting to the provisions of Rule 6(b)(ii). In the show cause notice issued on the assessee, it was alleged that there was a short payment of Rs. 5,66,046/- as worked out in Annexure 'A' thereto, in respect of the removals effected between August 1998 and January 1999. 2.1 The adjudicating authority on the basis of the material on record, found that there was no major difference between the physician's samples and the regular goods of the same quality because it was noticed that most of the medicaments, both in retail strips as well as physician's samples, were put in similar laminated foils. The packing for retail sales was in foils of 10 tablets each packed in cardboard boxes whereas, the physician's samples were cleared in an outer casing of laminated paper and inner packing of aluminium foil. It was, therefore, held that there was no justification in claiming different price for physician's samples from the medicaments sold in retail under MRP. Against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amples and the normal packs cannot be considered as comparable goods , inasmuch as, except quality of the product all other factors including packing, printing, labelling etc. are not comparable. 4. The learned authorized representative appearing for the assessee and the learned counsel appearing as an intervener have contended that Chapter Note 5 of Chapter 30 (Pharmaceutical Products) defined manufacturing in the context of such products and, therefore, until labelling or re-labelling or repacking into retail packs was done, the final product of such medicaments will not come in to existence. Therefore, the labelling and packing done for the purpose of free physician's samples would bring about a final product different from the commercial packings of identical medicine. It was contended that the proper method to be adopted for working out the value of such free samples was that of costing, and the assessable value of such samples cannot be determined with reference to the price of the commercial packs which differed in the quantity of such medicines. It was submitted that the final product as packed in the free samples was different from the identical product which was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pting the best judgment principle based on the cost of production and the profits which the assessee would have earned. In that case it was found that there was no other manufacturer of similar bottles. (d) The decision of the Madhya Pradesh High Court in Gwalior Rayon Mfg. (Wvg.) Co. v. UOI others reported in 1982 (10) E.L.T. 844 (MP) which upheld the validity of Rule 6(b)(i), was cited to point out that it was held in the context of the said rule that the expression comparable goods in the rule indicated that the goods taken into account for determining the assessable value should be comparable with the excisable goods and if there is any difference in the material characteristics of the excisable goods and the comparable goods, it has to be obliterated, by taking into account all the relevant factors and making such adjustment as may be reasonable for that purpose in order to find out the nearest ascertainable equivalent . It was held in para 21 of the judgment that sub-clause (ii) provides that if the value cannot be reasonable determined under sub-clause (i) of Rule 6(b) then the cost of production or manufacture including the profits, if any, which the assessees would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed it. 7. Admittedly, the medicines which were sold in commercial basis and which were contained in the free medical samples were identical. The learned authorized representative for the assessee, in fact, demonstrated before us the regular packs containing ten tablets meant for retail sale and the physician's samples of the same medicine MEFTAL which were to be supplied free to doctors. From the record it appears that even the adjudicating authority had a look at these packs. We noticed that the tablets are put in similar aluminium foils both in regular packs as well as the physician's samples, and both the packs contained they contained the requisite writings about the composition etc. of the medicines. The only difference in the packs was in their size because there are placed ten tablets in a regular retail pack while four in the physician's sample. The colour scheme is also different. The physician's sample is placed in a catch cover on which also there is an endorsement that it was physician's sample not to be sold besides the other required data which was required to be printed in accordance with law for indicating the composition of the medicine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be determined under Rule 4 or Rule 5 and - (a) x x x x x x (b) where the excisable goods are not sold but are used or consumed by him or on his behalf in the production or manufacture of other articles, the value shall be based - (i) on the value of the comparable goods produced or manufactured by the assessee or by any other assessee: Provided that in determining the value under this sub-clause the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relevant factors and, in particular, the difference, if any, in the material characteristics of the goods to be assessed of the comparable goods; (ii) if the value cannot be determined sub-clause (i), on the cost of production or the manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods. 9.1 It will be noticed from Rule 6(b)(i) that it refers to the value of comparable goods produced or manufactured by the assessee or by any other asseessee. By itself, Rule 6(b) would apply only where the goods are not sold by the assessee, but are used or consumed by him or on his behalf in the production and manufacture of ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) of Rule 6, meaning thereby that where there is no value of comparable goods available and therefore no scope for the proper officer to make adjustments as per the proviso to sub-clause (i) of sub-clause (b) of Rule 6, then only the costing method can be resorted to under sub-clause (ii) of sub-clause (b) of Rule 6, but not otherwise. 10. Where the medicines put in the retail packs and free physician's samples are identical in the material characteristics as well in quantity, then there would be no scope for any doubt in working out the value of the excisable goods not sold, namely, free physician's samples on the basis of value of such medicines which are sold by the assessee, as provided by Rule 4. The only adjustment contemplated in that rule would be on account of the difference in the dates of delivery which can be made in cases where there is such difference in the delivery dates. However, when the physician's sample differs in quantity though identical in essential characteristics of' the medicine, keeping in view Chapter Note 5 of Chapter 30, which includes labelling, repacking etc. in the manufacturing process, these nonetheless would be comparable go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case before the Supreme Court, the size and the shape of the bottles were different and it was observed that the shape and the size of the bottle supplied to JIL cannot be compared with the shape and size of the bottles of Hamdard, Dabur, Maza, Kissan etc. Even the thickness of the glass of the bottles supplied to a liquor manufacturer would be different from the thickness of the glass bottles supplied to a manufacturer of drugs/food products. It was held that Rule 6(b)(i) casts a duty on the department to approve the assessable value and it was for the department to find out whether there are goods comparable to the assessee's goods. There is nothing in this decision which would affect the ratio laid down in Charak Pharmaceuticals and Cheryl Laboratories (P) Ltd. and therefore, the bench was not justified in Trinity Pharmaceuticals (P) Ltd. in brushing aside the well considered opinion of the Tribunal expressed by the co-ordinate benches in these cases. The decision in Trinity Pharmaceuticals (P) Ltd. therefore does not lay down the correct law and to the extent that it decides against the ratio of the decisions in Cheryl Laboratories (P) Ltd., (Charak Pharmaceuticals) and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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