Custom, Excise & Service Tax Tribunal
Nicholas Piramal Ltd vs Commissioner Of Central Excise, ... on 26 May, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No. E/423/07-Mum (Arising out of Order-in-Appeal No. AT/800/M-III/2006 dated 26.12.2006 passed by Commissioner of Central Excise (Appeals), Mumbai-II) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) and Honble Mr. Devender Singh, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
======================================================
Nicholas Piramal Ltd. Appellant
Vs.
Commissioner of Central Excise, Mumbai-II Respondent
Appearance:
Shri Vinod Awtani, C.A., for appellant
Shri N.N. Prabhudesai, Superintendent (AR), for respondent
CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial)
Honble Mr. Devender Singh, Member (Technical)
Date of Hearing: 26.5.2016
Date of Decision: 26.5.2016
ORDER NO
Per: M.V. Ravindran
This appeal is directed against order-in-appeal No. AT/800/M-III/2006 dated 26.12.2006.
2. The issue involved in this case is regarding valuation of physician samples during the period April 1996 to March 2000. The appellant is a manufacturer of pharmaceutical goods and in order to promote their business, is manufacturing and clearing physician samples. For discharging central excise duty on such physician samples, the appellant arrives at valuation on the pro rata basis of the sale pack cleared by them. There is no dispute as to discharge of central excise duty on the sale pack as also on the physician samples pack on pro rata basis but the dispute is related to non-inclusion of the value of extra packing charges which is in the form of catch covers. The lower authorities after following due process of law, confirmed the demands along with interest and also imposed penalties. The first appellate authority concurred with the view of the adjudicating authority.
3. The learned counsel submits that identical issue in respect of their own sister unit was decided by the Tribunal, which is reported at 2009 (240) ELT 91. He produces the copy of the Tribunals order dated 19.11.2008 and reads the relevant portion and paragraphs. It is his submission that the demand made for the cost of extra packing is already included in the pro rata price of the regular pack, hence it will lead to regular taxation. It is also his submission that there was no mala fide intention as the appellant has discharged the duty liability as per their understanding while the demand has been raised in the show cause notice dated 30.4.2001 invoking extended period which is incorrect.
4. The learned departmental representative, on the other hand, would submit that extra cost of the packing material and catch cover is not included in the valuation of the physician sample for discharging duty liability. He would submit that the apex court in the case of Biochem Pharmaceuticals Ind. Ltd. vs. CCE, Vapi reported in 2015 (322) ELT 808 (SC), was considering the very same issue whether valuation has to be done on pro rata basis or cost basis and submits that the Honble Supreme Court has held that as per Rule 7 of the Valuation Rules, best judgment method is to be applied and accordingly, the best judgment method has been applied in this case.
5. We have considered the submissions made by both sides and perused the records. In our considered view, the appellant has made out a case in their favour for more than one reason.
6. As already recorded herein above, the issue is regarding valuation of physician samples. The allegation of the Revenue and the findings of the lower authorities are that the physician samples which are cleared in catch covers, and the value/cost of such catch covers needs to be included in the value of physician samples on which duty liability is discharged. It is recorded that the appellant discharges the appropriate central excise duty on physician samples on the pro rata value on the sale pack.
7. Firstly, we find that the appellants claim before the lower authorities that the value of the catch covers is already included in the value of the sale pack when cleared for home consumption is not controverted. Secondly, we find that the issue in respect of their own sister unit wherein this Bench has held in paragraph 3 is in their favour. Thirdly, we do find strong force on the question of limitation also as the appellant had discharged the duty liability on pro rata basis is not disputed and the dispute, if any, is only regarding non-inclusion of the catch covers value/cost. This cannot be considered as intent to evade duty and hence invoking of extended period is also incorrect.
8. Regarding the reliance placed by the departmental representative in the case of Biochem Pharmaceuticals Ind. Ltd. (supra), the apex court was considering the valuation whether to be done on the basis of pro rata or cost basis. In paragraph 3 of the said judgment, the apex court has categorically laid down that the valuation of physician samples which are distributed free to the physicians has to be done on pro rata basis relying upon their own judgment in the case of Medley Pharmaceuticals vs. CCE, Daman reported in 2011 (2) SCC 601 = 2011 (263) ELT 641 (SC). After laying down the law, Their Lordships proceeded ahead and clarified the legal aspect as to the valuation of the physician sample how it has to be done in paragraphs 7 and 8 wherein Their Lordships, after considering the provisions of Rule 7 of the Central Excise Valuation Rules, held that the best judgment method can be adopted by the authorities wherein Rule 6(b) which has got two sub-rules that can be applied. Their Lordships in paragraph 8 has held as under:-
8. In these cases the physicians samples which are given free of cost are clearly comparable with the goods that are manufactured by the assessee and sold in the market as the two goods are identical. In fact out of the same lot manufactured some are distributed as samples. Therefore, even while exercising his power under Rule 7 the proper officer can choose any of the aforesaid two methods prescribed in Rule 6(b) of the Rules. No doubt it is the discretion of the proper officer to determine the value as it is his best judgment which he has to exercise. However, the Rule also mentions that while exercising his best judgment, he has option to give regard to any of the methods, prescribed in the earlier rules. The words among other things would indicate that regard can be to other material also which is produced. Thus while exercising his discretion as to which method is most suitable in a given situation, the proper officer will have to look into entire relevant material furnished before him. (emphasis supplied) It can be seen from the above reproduced findings that Their Lordships were clarifying how the valuation has to be done. In the case in hand, this paragraph helps the appellant as the appellant has valued the physician sample based upon pro rata basis with the comparable goods available, the comparable goods being sale pack of the physician sample.
9. In view of the foregoing and the judicial pronouncements, we hold that the impugned order is unsustainable and liable to be set aside and we do so.
10. The impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Operative part of order pronounced in Court) (Devender Singh) Member (Technical) (M.V. Ravindran) Member (Judicial) tvu 1 6 E/423/07