Custom, Excise & Service Tax Tribunal
M/S. Sai Mirra Innopharm Pvt. Ltd vs Cce, Chennai - Ii on 29 October, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI E/430/2005 in E/431/2005 (Arising out of Order-in-Appeal No. 12 & 13/2005 (M-II ) dated 28.02.2005, passed by the Commissioner of Central Excise (Appeals) Chennai). M/s. Sai Mirra Innopharm Pvt. Ltd. : Applicant Vs. CCE, Chennai - II : Respondent
Appearance None For the applicant Shri K.P. Muralidharan, AC (AR) For the respondent CORAM Honble Shri R. PERIASAMI, Technical Member Honble Shri P.K. CHOUDHARY, Judicial Member Date of Hearing/Decision: 29.10.2015 FINAL ORDER No. 41479-41480 / 2015 Per: P.K. Choudhary Since the issues involved in both the appeals are common and arising out of the common OIA No. 12 & 13/2005 (M-II) dated 28.02.2005, both are taken up together for disposal.
2. The brief facts of the case are that the appellants are the manufacturers of pharmaceutical products both sales pack as well as samples pack falling under Chapter 30. The samples pack is smaller in quantity compared to the sales pack and they cleared these samples pack on payment of duty for distribution to Doctors as physicians samples. They were paying duty on such free samples pack on proportionate value based on the value of sales pack. The appellant assessees has filed refund claim for Rs. 1,14,485/- for the period May, 2002 to April, 2003 and refund claim of Rs. 1,14,264/- for the period February, 2002 to January, 2003 on the condition that the valuation of samples distributed free is to be done under Rule 1 read with Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods), 2000. The adjudicating authority rejected their refund claim on the ground that the assessees had failed to produce any documentary evidence to substantiate the cost of production. On appeal, the Commissioner (Appeals) upheld the order of the adjudicating authority and rejected their appeals. Hence the present appeals.
2. These appeals were listed for hearing on several occasions viz. 17.10.14, 24.3.15, 22.5.15, 5.6.15 and 23.07.15, nobody represented on behalf of the appellants on these dates. On 23.07.15 final notice was issued and the cases were listed on 31.08.15 and adjourned to 29.10.15. Today also none appeared on behalf of the appellants nor there is any cross-objection filed. Since, the appeals are arising out of a common order and relates to 2005, we proceed to dispose of the appeals on merits.
3. Ld. AR appearing on behalf of the Revenue reiterates the findings of the adjudicating authority and the Commissioner (Appeals) and relied on the LB decision of the Ahmedabad Bench of the Tribunal in the case of Cadila Pharmaceuticals Ltd. Vs. CCE, Ahmedabad 2008 (232) ELT 245 (Tri. LB).
4. After hearing the Ld. AR, we find that the short issue involved in these cases relates to rejection of refund claim of excise duty paid on the physician samples. On perusal of the OIA and OIO, we find that the appellants paid duty on the free samples on proportionate value derived from the sales pack. The refund claims were rejected by the authorities below on the ground that they have failed to produce any documentary evidence to substantiate the cost of production as per CAS4. The issue stands settled by the LB decision of the Tribunal in the case of Cadila Pharmaceuticals Ltd. (supra). The relevant portion of the said decision is reproduced as under:-
22.?Medicaments came to be notified as specified goods under Section 4A of the Act in January, 2005. Thus, when sold in packages or bottles, the MRP is to be treated as the value of medicines for purpose of Central Excise duty. The point for consideration is what shall be the assessable value of physicians samples which are not sold in market and are supplied free of cost. Since the physicians samples are not sold and they do not have MRP mentioned on them, the assessable value has to be determined in accordance with the provisions of the Valuation Rules - as per the mandate of Section 4(1)(b) of the Act. There is no dispute between the parties on this score.
29.?In order to attract Rule 4 there need not be another sale. The rule has been quoted above but in order to bring home the point, the relevant part of it may be quoted again as under :
The value of the excisable goods (read physicians sample) shall be based on the value of such goods sold by the assessee......
It would thus appear that there need be another sale of the goods, that is, medicines in the present case. The expression such goods must necessarily be understood as referring to the goods which are subject matter of assessment, that is to say, physicians sample in the instant case. It cannot be contended that physicians samples are different from the goods (medicines) sold notwithstanding that they may be sold in lesser quantities or in a different pack having different label, colour, etc. As held by the Bombay High Court, physicians samples are physically, chemically and functionally the same goods (medicines) which are sold in the market. I am in complete respectful agreement with their Lordships of the Bombay High Court that Rule 4 is the general rule and unless found to be inapplicable, would govern valuation of physicians samples. It is to be kept in mind that even if certain ingredients of Rule 4 are found lacking, it would make no difference, for, by virtue of Rule 11 of the Valuation Rules, it is the principle underlying the rule which needs to be applied consistent with other statutory provisions. The situation contemplated in Rule 8 on the other hand is completely different and alien. Rule 8 applies to cases where goods are cleared for use and consumption in the production or manufacture of other articles i.e. for captive consumption. Physicians samples are not supplied for being captively used for production or manufacture of any article; they are final products like any medicine sold in regular packs, and, therefore, the method of valuation provided in Rule 8 cannot be applied for valuation of physicians samples.
30.?The fact that medicines/medicaments are specified goods within the meaning of Section 4A of the Act since January, 2005, does not appear to have been brought to the notice of the Bombay High Court but this would hardly make any difference, for, the MRP is to be treated as value of the goods i.e. deemed value in place of the transaction value under Section 4(1)(a) and it does not take the goods out of the pale of Rule 4. Besides, it is to be kept in mind that the Bombay High Court was seized of a legal issue in the context of challenge to the validity of a circular issued on 25-4-2005, that is, in the aftermath of the notification under Section 4A(1).
31.?In view of the above discussions, I am of the opinion that notwithstanding the non-availability of the normal sale price under Section 4(1)(a) of the Act, by reason of the goods being specified under Section 4A(1) making the retail sale price i.e. MRP as its deemed value, the appropriate rule governing the valuation of physicians samples would continue to be Rule 4 and the decision of the Larger Bench in Blue Cross Laboratories Ltd.s case (supra) mutatis mutandis continues to be good law. The reference is accordingly answered in the affirmative in favour of the Revenue and against the appellant/assessee. The ratio of the above decision squarely applies to the facts of the present case. Hence, we do not find any infirmity in the order of the Commissioner (Appeals). Accordingly, we uphold the impugned order and reject the appeals.
(Dictated and pronounced in open court) (P.K. CHOUDHARY) (R. PERIASAMI) JUDICIAL MEMBER TECHNICAL MEMBER BB 1