Custom, Excise & Service Tax Tribunal
Themis Laboratories Pvt Ltd vs Commissioner Of Central Excise, Mumbai on 1 February, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/244/09, E/149 & 150/10 (Arising out of Order-in- Original No.16/SHH//08-09 dated 19/01/2009 passed by the CCE, Mumbai-III & Order-in-Appeal No.SB/96/Th-I/09 dated 21/10/2009 dated passed by Commissioner of Central Excise (Appeals), Mumbai) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, 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 :
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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Themis Laboratories Pvt Ltd.,
Meghdoot Chemicals Ltd., Appellant
Vs.
Commissioner of Central Excise, Mumbai Respondent
Appearance:
Shri Naresh Thacker, Advocate for appellant for Themis Laboratories
Shri.Prasad Paranjape, Advocatefor appellant for Meghdoot Chemicals
Shri.N.A. Sayyad, JDR, for respondent
CORAM:
Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. P.R.Chandrasekharan, Member (Technical)
Date of Hearing : 01/02/2011
Date of Decision : 01/02/2011
ORDER NO
Per: Ashok Jindal
1. All the three appeals are having a common issue, hence are taken up together and disposed of by this common order.
2. The facts of M/s.Themis Laboratories Pvt Ltd., are that it was noticed that the appellant was clearing the trade packs of medicaments manufactured by them on payment of Central Excise duty for which the assessable value was arrived as per the provisions of Section 4A of the Central Excise Act, 1944 i.e. based on MRP after availing the prescribed abatement in terms of notification No.02/2005-CE (NT) dated 07/01/2005. It was also noticed that the assessable value of physician samples was lower than the assessable value of the same medicaments cleared in trade packs.
3. On enquiry, the appellants submitted that they were not clearing the physician samples for free distribution to the doctors but are selling to other companies at an agreed price as per the purchase order placed with them. Therefore, the price mentioned in the purchase order is sole consideration for sale and the transactions are on principal to principal basis, their customers are not related person. Hence, the transaction value is the sole consideration for sale, an assessable value is to be arrived on transaction value. The department wanted to assess the value of the clearances of physician samples as per Section 4A of the Central Excise Act, 1944. Hence, a show-cause notice was issued and demands were confirmed. Aggrieved by the said determination of demand, the demand of duty, interest and penalties, the appellants are before us.
Appeal No.E/149 & 150/10
4. In the case of Meghdoot Chemicals Ltd., the appellants are the manufacturer of medicaments and clears the physician samples from their factory on following counts; (a) on the basis under a P & P contract arrangements and (b) on job work basis to arrive the assessable value in the case of contract sale basis.
5. The transaction value is calculated as per Section 4A of the Central Excise Act, 1944 on the clearances of physician samples and for the assessable value in case of job work basis, cost construction method was adopted to arrive at the assessable value. The department sought to assess the assessable value as per the Section 4A of the Central Excise Act, read with Section 4 of the Central Excise Valuation Rules, 2000 and a show-cause notice was issued and demands were confirmed. Aggrieved by the said order, the appellants are in appeal. From the above narrated facts, the issue before this Tribunal is that whether the goods (medicaments) manufactured by the appellants, which are in the nature of physician samples should be assessed to Central Excise duty on the basis of value of comparable goods i.e. sale packs of medicines under Section 4A of the Central Excise Act, 1944 read with Rule 4 of Central Excise Valuation Rules, 2000 or should it be assessed on the basis of transaction value as per Section 4 (1) (a) of the Act or under cost construction method, as the case may be.
6. The Ld. Advocate appearing on behalf of the appellants submit that it is not statutorily required to be printed the MRP on the physician samples, therefore, Section 4A of the Act, is not applicable at all for valuation. It was further contended that the payment of duty under Section 4 (1) (a) of the Act, on the basis of transaction value is proper as these physician samples are cleared by the appellants on transaction value as per the contract price and they are not distributed free of cost by the appellants. They also submitted that when the Section 4 (1) (a) is available then recourse to Section 4 (1) (b) of the Act, is not permissible. They also submitted that the Boards Circular No.813/10/2005-CX dated 25/04/05 is not applicable to the appellants case as the physician samples are sold by them not distributed free of cost. They also submitted that the decision of the Honble Bombay High Court in the case of Indian Drugs Manufacturers Association Vs. UOI reported in 2006-TIOL-292-HC (Mum), is not applicable to the facts of these cases as in that case the physician samples were cleared by the manufacturer free of cost to the doctors.
7. The Ld. Advocate further submits that in the case of Jayanti Food Processing (P) Ltd., Vs. CCE, Rajasthan, reported in 2007 (215) ELT 327 (SC), the Honble apex Court has held that the physician samples are not liable to be assessed under Section 4A of the Act, as there is no requirement to print MRP on the physician samples as they are for free distribution. They also submitted that when the transaction value is available at factory gate, there is no need to take recourse to Section 4 (1) (b) of the Act, read with Valuation Rules. To support their contention that the assessable value should be as per Section 4 (1) (a) of the Act is proper, they relied upon on the decision of the Tribunal in the case of Mayer Health Care Pvt Ltd., Vs. CCE, Bangalore, reported in 2009 (247) ELT 488 (Tri-Bang) and CCE Vapi Vs. Sun Pharmaceuticals Industries Ltd., reported in 2008-TIOL-1903-CESTAT AHM.
8. On the other hand, the Ld. DR carefully relied on the decision of Indian Drugs Manufacturers Association (IDMA) (supra) and submitted that the Honble High Court of Bombay has held that the physician samples are to be valued as per Section 4 (1) (b) read with Valuation Rules. He also relied on the decision of CCE, Daman Vs. Sun Pharmaceuticals Ltd., reported in 2009 (245) ELT 749 (Tri-Ahmd), wherein on the similar facts this Tribunal allowed the appeal of the Revenue wherein the transaction value was challenged by the Revenue and submitted that the price is not the sole consideration.
9. Heard and considered the submissions made by both sides.
10. On careful examination of the submissions made by both sides, we find that in this case the short issue is to be decided that the physician samples cleared by the appellants, on transaction value under contractual price what should be the assessable value? Whether as per Section 4 (1) (a) of the Act or as per Section 4A read with Rules to determine the issue. The Section 4 is re-produced here as under:
[4. Valuation of excisable goods for purposes of charging of duty of excise. (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be -
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale:
Provided that -
(i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such class of buyers;
[(ia) where the price at which such goods are ordinarily sold by the assessee is different for different places of removal, each such price shall,, subject to the existence of other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such place of removal;]
(ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the lime being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof;
(iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail;
(b) where the normal price of such goods is not ascertainable for the reason, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed.
11. 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.
12. 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.
13. As contended by the DR that as the physician samples are made free of sale and the medicaments are governed by MRP based valuation and these physician samples are for free distribution, the valuation is to be arrived on value of the comparable goods as held by the Honble High Court of Bombay in the case of IDMA (supra). We find in the case of IDMA (supra), the facts are somehow different from the facts in hand as in the case of IDMA, the physician samples were cleared by the manufacturers themselves, where there was no transaction value was available at the time of clearance of the physician sample, which is not in the cases here, these physician samples are cleared to the brand owner/buyers on a transaction value, which were further distributed/delivered by the buyer free of cost to the physicians/doctors.
14. 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.
15. 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.
16. 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).
(Pronounced in Court) (P.R. Chandrasekharan) Member (Technical) (Ashok Jindal) Member (Judicial) pj 1 2