Custom, Excise & Service Tax Tribunal
Softsule Pvt Ltd vs Commissioner Of Central Excise, ... on 13 April, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/1123 & E/1248/07 E/CO/247/07 (Arising out of Order-in-Original No.19/KKS/06-07 dated 28/02/2007 passed by Commissioner of Central Excis, Mumbai-III) For approval and signature: Honble Mr. B.S.V. Murthy, Member (Technical) Honble Mr. Ashok Jindal, Member (Judicial) ======================================================
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 :
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?
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Softsule Pvt Ltd., Appellant
Vs.
Commissioner of Central Excise, Mumbai-III Respondent
Commissioner of Central Excise, Mumbai-III Appellant
Vs.
Softsule Pvt Ltd., Respondent
Appearance:
Shri.Bharat Raichandani, Advocate for appellant
Shri. V.K. Singh, SDR, for respondent
CORAM:
Honble Mr. B.S.V. Murthy, Member (Technical)
Honble Mr. Ashok Jindal, Member (Judicial)
Date of Hearing : 13/04/2011
Date of Decision : 13/04/2011
ORDER NO
Per: Ashok Jindal
1. Both the assessee as well as the Revenue are aggrieved by the impugned order passed by the Commissioner of Central Excise, Mumbai-III, therefore, both are in appeal before us. The assessee has also filed a cross objection to the appeal of the Revenue.
2. The brief facts of the case are that the assessee is engaged in the manufacture of pharmaceutical products and the allegation against them is that they have not arrived at correct assessable value in respect of physician samples cleared by them. As the assessee is clearing the physician samples on payment of Excise duty on assessable value based on cost of raw materials as per provisions of Rule 8 of the Central Excise Rules, 2000, which is lower than the assessable value at which the clearance of the same goods is effected in the normal course of trade. The preliminary inquiry of the invoice revealed that the assessee is clearing their goods on payment of Central Excise duty on assessable value arrived at thereon as per the provisions of Section 4 of the Central Excise Act, 1944 (The Act) upto 06/01/2005 and thereafter under Section 4A (i.e. MRP basis) of The Act in terms of Notification No.02/2005-NT dated 07/01/2005. Accordingly, the assessee is discharging their Central Excise duty on the basis of value at which they were selling their products to their customers in the course of normal trade till 06/01/2005 and thereafter based on MRP after availing prescribed abatement. It was also noticed that the assessee was also clearing physician samples of the same product and discharging Central Excise duty thereon by arriving at assessable value as per the provisions of Rule 8 of the Central Excise Rules, 2000. (Valuation Rules) i.e. 115-110% of cost of production. It was further observed that the assessable value of the physician samples was lower than the assessable value of the similar goods cleared in the course of normal trade. Therefore, it was observed that the provisions of Rule 4 of the Valuation Rules are appropriate to arrive at the assessable value in respect of clearances of physician samples, since the assessee is also clearing the same goods in the course of normal trade. Therefore, show-cause notice was issued, duty demands were confirmed. Therefore, the matter was assessed and demands prior to 25/04/2005 were dropped and demands for the period after 26/04/2005 were confirmed along with penalties and applicable interest. The assessee is in appeal against the confirmation of demand and Revenue is in appeal against the dropping of the demands prior to 25/04/2005.
3. The Ld. Advocate for the assessee submits that the issue in this case is of determination of assessable value of physical samples cleared from their factory (a) on the basis under a P&P contract arrangements and (b) on job-work basis to arrive at the assessable value in the case of contract sale basis. The Ld. Advocate for the assessee further submits that this Tribunal has dealt the issue in detail in the case of Themis Laboratories Pvt Ltd., vide order No.A/187 to 189/2011/EB/C-II in detail and thereafter this Tribunal has decided the issue in favour of the assessee, hence, the impugned order confirming the duty is to be set aside.
4. Heard and considered.
5. On the other hand, the Ld. DR reiterated the grounds of appeal.
6. After hearing both sides, we find that the issue before us is that whether the goods (medicaments) manufactured by the assessee, which are in nature of physician samples should be assessed to Central Excise duty on the basis of value of comparable goods i.e. sale pack of medicines under Section 4A of the Central Excise Act, 1944 read with Rule 4 of the Central Excise Valuation Rules, 2000 should be assessed on the basis of transaction value as per the Section 4 (1) (a) of the Act or under cost construction method, as the case may be.
7. This Tribunal has dealt this issue in detail in the case of Themis Laboratories Pvt Ltd., supra, wherein this Tribunal has observed as under:-
From a plain reading of Section 4 (1) (a), it is clear that in case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale the assessable value shall be the transaction value and in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
In this case, we find that the appellants have cleared their goods to the buyers, who are admitted not the related person, on a contractual price, the ingredients of Section 4 (1) (a) are complied by the appellants to arrive at assessable value is the transaction value.
The facts of the case of Mayer Health Care Pvt Ltd., (supra) are similar to the facts of these cases where the appellants were the manufacturer of pharmaceutical goods on its own as well as on loan licencee basis. The buyers generally desire to give some of the products on free samples to the doctors and hospitals. Accordingly, they instruct the appellant to put the label as free sample on the products. In case of loan licencee, the appellant discharged the duty based on Rule 8 read with Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules. In case of manufacture of their own goods, which are ultimately given as free sample by the buyer, the duty has to be discharged on the transaction value. In that case, this Tribunal has observed as under:-
The point to be appreciated is if an item is sold by the manufacturer or cleared for a consideration, then duty is payable on the transaction value in terms of Section 4 of the Central Excise Act. and finally this Tribunal has observed that the samples are not distributed by the appellants free but cleared on receipt of consideration. Hence, the Central Excise duty is payable on transaction value.
Reliance placed by the Ld. DR in the case of CCE, Daman Vs. Sun Pharmaceuticals Ltd., (supra) is not applicable to the facts of this case, as in that case the facts are not similar to the case in hand. In fact in that case, the delivery and distribution of physician samples were under the control of the assessee himself and the medical representative (who are the employees of the representative) distributed free samples to the physicians even after the sale of samples to M/s. Aditya Medisales Ltd., Bhiwandi. The sale to M/s.Aditya Medisales Ltd., was deliberately created on paper and therefore, cannot be said to be a transaction on principal to principal basis, the price is not the sole consideration. Hence, the reliance placed by the DR is not of no help.
As held by this Tribunal, in the case of Mayer Health Care Pvt Ltd., (supra) that the samples are not distributed by the appellants free but cleared on receipt of consideration. Hence, the excise duty is payable on transaction value and it is admitted fact in the cases in hand that these physician samples were cleared by the appellant on principle to principle basis on a transaction value, which was admissible at the time of clearance of the physician samples, than the transaction value is to be determined as per Section 4 (1) (a) of the Act. Accordingly, the impugned orders are set aside and it is held that the appellants have correctly valued the physician samples cleared by them on transaction value/as per CAS-4. Therefore, all the appeals are allowed with consequential relief (if any).
8. We find that as the issue has been dealt in detail and wherein this Tribunal has held that the ingredients of Section 4 (1) (a) are complied with by the appellants to arrive at assessable value is the transaction value. Further, this Tribunal has also held that the assessee has correctly valued the physician samples cleared by them on transaction value or as per CAS-4, therefore, the issue is no more res integra.
9. In view of the above observation, the assessees appeal is allowed and the Revenues appeal is rejected. Cross objection filed by the assessee is also disposed off in the above manner.
(Pronounced in Court) (B.S.V. Murthy) Member (Technical) (Ashok Jindal) Member (Judicial) pj 1 2