Custom, Excise & Service Tax Tribunal
Kilitch Drugs (I) Ltd. vs Cce Belapur on 18 October, 2019
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
EXCISE APPEAL NO: 1722 of 2010
[Arising out of Order-in-Appeal No: PKS/160/BEL/2010 dated 2nd July 2010
passed by the Commissioner of Central Excise (Appeals), Mumbai - III.]
Kilitch Drugs (I) Ltd ... Appellant
C-301/2 TTC Industrial Area, Pawne Village, Thane
versus
Commissioner of Central Excise ...Respondent
Belapur, 1st Floor, CGO Complex, CBD, Belapur, Navi Mumbai - 400 614 APPEARANCE:
Ms Lalita Phadke, Advocate for the appellant Shri NN Prabhudesai, Superintendent (AR) for the respondent CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) HON'BLE DR SUVENDU KUMAR PATI, MEMBER (JUDICIAL) FINAL ORDER NO: A/86863 / 2019 DATE OF HEARING: 16/04/2019 DATE OF DECISION: 18/10/2019 PER: C J MATHEW The dispute in this appeal of M/s Kilitch Drugs (I) Ltd against order-in-appeal no. PKS/160/BEL/2010 dated 2nd July 2010 of E/1722/2010 2 Commissioner of Central Excise (Appeals), Mumbai - III pertains to the clearance of 'physician's samples' between January 2005 and January 2008 for which duty of ₹ 38,77,711/- along with interest thereon confirmed and penalty of like amount was imposed by the original authority has been approved.
2. It is the contention of the Learned Counsel appearing for the appellant that these 'physician's samples' which were valued on 'cost construction basis' for discharge of duty liability were manufactured out of raw material and packing material supplied by the principal and the goods are, thereafter, sent to the principal. From this, we infer that the appellant is a 'job-worker' and that the samples are intended for distribution by the principal manufacturer. It is pointed out that the central excise authorities were insistent upon the computation of value in accordance with rule 4 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000 requiring the adoption of the value of medicines, produced as 'job-worker' and subject to duties under section 4A of Central Excise Act, 1944, as assessable value. According to Learned Counsel, the rules for valuation were directly and exclusively linked to section 4 of Central Excise Act, 1944 and thereby precluded any resort to, or with reference to, section 4A of Central Excise Act, 1944. Reliance was placed on the decision of the Hon'ble Supreme Court in Medley Pharmaceuticals Ltd v. Commissioner of Central Excise & Customs, Daman [2011 (263) ELT 641 (SC)], Commissioner E/1722/2010 3 of Central Excise, Goa v. Cosme Farma Laboratories Ltd [2015 (318) ELT 545 (SC)] and in Commissioner of Central Excise & Customs, Hyderabad - III v. Biotech Medicals Pvt Ltd [2018 (362) ELT 721 (Tri.-Hyd.)] which was approved by the Hon'ble Supreme Court and on Medispray Laboratories Pvt Ltd v. Commissioner of Central Excise, Goa [2017 (5) GSTL 300 (Tri.Mumbai)]. Likewise, the decision in Zyg Pharma Pvt Ltd v. Commissioner of Central Excise, Indore [2017 (348) ELT 389 (Tri.-Del.)] was also relied upon.
3. According to Learned Authorised Representative, the decision cited by Learned Counsel would not sustain in the face of Hyva (India) Pvt Ltd v. Union of India [2015 (327) ELT 41 (Bom.)], of Indian Drugs Manufacturer's Association v. Union of India [2008 (222) ELT 22 (Bom.)] and of Cadila Pharmaceuticals Ltd v. Commissioner of Central Excise, Ahmedabad - II [2008 (232) ELT 245 (Tri.-LB)].
4. The issue to be noted here is that the 'physician's samples' are not distributed to physicians by the appellant; these are produced on behalf of principal-manufacturer and sent to them. As these were not intended for retail sale, the applicability of section 4A of Central Excise Act, 1944 does not arise. Taking recourse to section 4 of the Central Excise Act,1944, the appellant has adopted 'cost construction' which is the appropriate method considering that the transaction is not one of sale. Accordingly, the decision cited by the Learned Authorised E/1722/2010 4 Representative would fail to meet the test of precedent. In re Medispray Laboratories Pvt Ltd the Tribunal, after considering the prevailing decision in Commissioner of Central Excise, Goa v. Cosme Remedies Ltd [2016 (344) ELT 379 (Tri. - Mumbai)], settled the dispute thus '5.1 We find that all the three appellants are manufacturing physician samples not for their own but on behalf of the buyers either on job work basis or on principal to principal basis. Therefore, the issue of valuation as regards the physician samples is not concerned with the present appellants. Rule 4 of Central Excise Valuation Rules, 2000 shall apply only in those cases where the manufacturer manufacturing the physician samples and they themselves supplying free sample in the market. In the present case, all the three appellants are not supplying physician samples free of cost either in case of job work basis or in the sale basis, the goods are sold to the principal. In such case, irrespective [of the fact that] it is physician samples, the valuation shall be governed by Section 4 of the Central Excise Act. In case of job work, the value should be in terms of principles laid down by the Hon'ble Supreme Court in the case of Ujagar Prints - 1989 (39) ELT 493 (S.C.). Accordingly, the valuation shall be determined on the basis of cost of raw material + job charges including the profit of the job worker. It is not the case of the Revenue that the value determined by the appellant is less than the value to be arrived at on the principles of Ujagar Print's case.'
5. A similar situation arose in re Zyg Pharma Pvt Ltd and it was held that '11. In view of the above discussions and analysis, we find that the original order dated 16-3-2009 holding that value of E/1722/2010 5 physician samples in the appellant-assessee's case is to be made in terms of Rule 4 is not sustainable. Accordingly, we allow the appeals filed by the appellant-assessee. For the reasons the appeals filed by the Revenue against later orders dropping the demands are also liable to be rejected. Accordingly, the appeals filed by the Revenue are rejected.
6. Considering the consistent stand of the Tribunal and the non- applicability of the decision in re Hyva (India) Pvt Ltd and in re Indian Drugs Manufacturer's Association, which did not take into consideration that the clearances were effected by job-workers, we can arrive at no other conclusion.
7. Accordingly, the impugned order is set aside and appeal allowed.
(Order pronounced in the open court on 18/10/2019) (C J Mathew) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) */as17101810