Custom, Excise & Service Tax Tribunal
M/S Gelnova Laboratories (I) Pvt. Ltd vs Commissioner Of Central Excise, ... on 14 June, 2013
IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. II
IN APPEAL NO. E/1894/12, E/763/09, E/1047/10 & E/86202/13
Appeal No.
Order-in-Original No. /Order-in-Appeal No.
Dated
Passed by
E/1894/12
BC/244/Bel/2012-13
30.08.2012
Commissioner of Central Excise (Appeals), Belapur.
E/1047/10
Belapur/17-18/Bel-II/Dn./R-IV/COMMR/ SLM/2009-10
15.03.2010
Commissioner of Central Excise, Belapur.
E/763/09
Belapur/63/Bel-II/Dn./R-IV/COMMR/ WLM/2008-09
19.03.2009
Commissioner of Central Excise, Belapur.
E/86202/13
Belapur/58/Bel-II/R-IV/COMMR/ KA/2012-13
30.11.2012
Commissioner of Central Excise, Belapur.
For approval and signature: Shri S.S. Kang, Honble Vice President
Honble Mr. P.K. Jain, 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 : Seen CESTAT (Procedure) Rules, 1982 for Publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : yes of the order?
4. Whether Order is to be circulated to the Departmental : yes authorities?
M/s Gelnova Laboratories (I) Pvt. Ltd.
: Appellant
Versus
Commissioner of Central Excise, Belapur
: Respondent
Appearance Shri Vipin Jian, Advocate : For Appellant Shri Navneet, Addl. Commissioner (A.R.) : For Respondent CORAM:
Shri S.S. Kang, Honble Vice President Honble Mr. P.K. Jain, Member (Technical) Date of Hearing :
14.06.2013 Date of Decision:
.10.2013 ORDER NO.......................................................
Per: P.K. Jain, Member (Technical) Common issue is involved in the 4 appeals and are therefore being taken up together. Appellants were issued 6 show-cause notices covering different periods. The first show-cause notice dated 16th July, 2008 is covering the period from January, 2005 to January, 2008, 2nd show-cause notice dated 23.01.2009 is covering the period from February, 2008 to July, 2008, the 3rd show-cause notice dated 18.11.2009 is covering the period from November, 2008 to August, 2009, 4th show-cause notice dated 22.09.2010 is covering the period from September, 2009 to July, 2010, the 5th show-cause notice dated 30.08.2011 is covering the period from August, 2010 to July, 2011 and last show-cause notice dated 03.09.2012 is covering the period from August, 2011 to June, 2012. The first and last show-cause notice was adjudicated by separate orders, 2nd and 3rd by another order and 4th and 5th by another order. 4th and 5th show-cause notice were adjudicated by Additional Commissioner, and thereafter appeal was filed by the appellants before the Commissioner (Appeals) who confirmed the orders of original authority. The other four show-cause notices were adjudicated by Commissioner. Appellants are before us against these four orders. Total duty involved in 3,48,59,897/- besides redemption fine, penalty and interest.
2. The appellant is manufacturer of P & P medicaments, which are covered under Section 4A of the Central Excise Act, 1944. The appellant also manufacture such P & P medicament as contract manufacturer. The dispute in regarding valuation of physician samples when the appellant has manufactured and cleared physician samples which are to be distributed free by the principal manufacturer. Appellant is clearing such physician sample by determining value as per Section 4 (1) (a) of the Central Excise Act, 1944. Revenue is of the view that the duty is to be discharged on the value arrived at as per Section 4A, i.e. wherever M.R.P. for the same size of pack is available, taking that as value after giving abatement and in other cases on pro-rata basis. The demands has been confirmed accordingly. In brief, the issue to be decided is that the physician samples manufactured on behalf of another manufacturer on principal to principal basis, the value of such samples is to be considered as transaction value under Section 4 or deemed value under Section 4A of the Central Excise Act.
3.1 Ld. Counsel submitted that the appellant is inter alia engaged in the manufacture of pharmaceutical products, including physician samples thereof, falling under Chapter 30, and, for this purpose, were procuring orders from various pharmaceutical companies having their own brand names and were selling the same to them at a mutually agreed price. The transaction between the appellant and the pharmaceutical companies from whom they procure orders is on principal to principal basis wherein the appellant procures its own raw materials and manufacture with its own machines, employing its own labour and other staff who work under its own control. Thus, the relationship between the appellant and its customer is on principal to principal basis where the customers, after placing the purchase orders, have no control of any nature over the manufacture of medicaments. The appellants unit came into existence in the year 2002 and ever since then they have been clearing their medicaments as well as physician samples on the basis of the transaction value, i.e. the price at which the medicaments, including physician samples, are sold by them to their customers. This practice has never been disputed by the department. It was in January 2005 that the medicaments sold in retail packs were brought under MRP based assessment under Section 4A, wherein the duty was required to be paid on the basis of MRP printed on the packs, after deducting the admissible abatement. The appellant started to pay duty on sale packs on the basis of MRP minus abatement and the same is not under dispute. The physician samples were, however, cleared on payment of duty on the transaction value in view of the fact that these samples are not meant for sale in the retail market and therefore there was no requirement of printing the MRP on the packs under the Standards of Weights and Measures Act, 1976.
3.2 Ld. Counsel for the appellant stated that they are manufacturing physician samples and selling the same on principal to principal basis, the assessment has to be done under Section 4 (1) (a) of the Central Excise Act. Ld. Counsel further argued that it is only in those cases where the goods are not sold or the price is not the sole consideration etc. that the value is required to be determined under the provisions of Section 4 (1) (b). Since, in the instant case the physician samples are actually sold by the appellant to the pharmaceutical companies, the question of determining the value under the provisions of Section 4 (1) (b) simply does not arise. Ld. Counsel further argued that the Commissioner in the impugned order has not disputed the determination of the value of physician samples under Section 4 (1) (a) of the Central Excise Act, 1944 but post 2005 the assessment has been shifted under Section 4A. This is incorrect. Ld. Counsel has the quoted the following case laws in support of his contention:-
i. Commissioner of Customs & Central Excise, Daman Vs. Sidmak laboratories (India) Pvt. Ltd. reported in 2009 (242) ELT 255 (Tri.- Ahmd).
ii. Commissioner Vs. Sidmak laboratories (India) Pvt. Ltd. reported in 2011 (270) ELT 90 (S.C.).
iii. Parnax Lab Pvt. Ltd. Vs. Commissioner of Central Excise, Vapi reported in 2012 (278) ELT 95 (Tri.- Ahmd).
iv. Allianz Bio Science Pvt. Ltd. Vs. Commissioner of Central Excise, Puducherry reported in 2012 (283) ELT 284 (Tri.- Chennai).
v. Themis Laboratories Pvt. Ltd. Vs. Commissioner of Central Excise, Mumbai reported in 2012 (286) ELT 244 (Tri.- Mumbai).
vi. Union of India & Others Vs. Cibatul Ltd. reported in 1985 (22) ELT 302 (S.C.).
vii. R.O. Industries Vs. Union of India reported in 2000 (120) ELT 31 (S.C.).
3.3 Ld. Counsel also stated that Larger Bench decisions in the case of Cadila Pharmaceuticals Ltd. Vs. Commissioner of Central Excise, Ahmedabad II, reported in 2008-TIOL-1668-CESTAT-Ahmd-LB is in different situation as in that case physician samples were distributed free by the manufacturer himself and therefore there was no transaction value under Section 4 (1) (a). The said judgement cannot be applied in the facts of present case.
3.4 Ld. Counsel also stated that in the first demand extended period has been invoked. Ld. Counsel stated that their factory is in existence since 2002 and they have been following the same system of valuation for paying the duty, Department had no objection. The unit was visited by the Audit in the month of December, 2006 and the said objection was raised. The show-cause notice was issued much later, under the circumstances there is no justification of invoking the extended period of limitation. Appellant had bonafied belief and department was aware of all details and therefore there is no suppression of facts.
4.1 The Ld. A.R. on the other hand, opposed the contention of the appellant and argued that Larger Bench of the Tribunal in the case of Cadila Pharmaceuticals Ltd. Vs. Commissioner of Central Excise, Ahmedabad II has clearly held that once an item is covered under Section 4A of the Central Excise Act, there is no question of assessing that item under Section 4 of the Central Excise Act. Ld. A.R. further argued that the Section 4A has non-obstenta clause and therefore the goods covered by Section 4A are required to be assessed under Section 4A alone and not under Section 4. For this purpose he drew attention to Section 4A, which reads as:-
Section 4A - Valuation of excisable goods with reference to retail sale price. -
(1) The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Legal Metrology Act, 2009 (1 of 2010) or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-section (2) shall apply.
(2) Where the goods specified under sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette.
(3) ----------.
4.2 Ld. A.R. drew attention to Para 30 of Cadila Pharmaceuticals Ltd. (supra) judgement, which reads as:-
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 25.04.2005, that is, in the aftermath of the notification under Section 4A(1). 4.3 Ld. A.R. further relied upon the Hon'ble Supreme Court decision in the case of Medley Pharmaceuticals Ltd. Vs. Commissioner of Central Excise & Customs, Daman reported in 2011 (263) ELT 641 (S.C.) to support that value has to be on proportionate basis, and stated that it is absolutely clear, that the physician samples even manufactured on contract basis and cleared to the pharmaceuticals company are required to be assessed under Section 4A on pro rata basis. Ld. A.R. also relied upon the Hon'ble Supreme Court judgment in the case of Whirlpool of India Ltd. Vs. Union of India reported in 2007 (218) ELT 167 (S.C.). He further argued that once item is notified under Section 4A of the Central Excise Act, the appellant cannot get out of scope of notification. Ld. A.R. also quoted that Tribunals decision in the case of Commissioner of Central Excise, Mumbai Vs. Godrej Industries Ltd. reported in 2006 (200) ELT 348 (Tri.- Mumbai), wherein this Tribunal has held that goods supplied free of cost with other item sold MRP based valuation would be applicable in case of goods notified under Section 4A of the Central Excise Act, 1944 and printed with MRP irrespective of the fact that they are meant for free distribution. Ld. A.R. argued that a harmonious reading of Hon'ble Supreme Courts decision in the case of Medley Pharmaceuticals Ltd. (supra) and Larger Bench of this Tribunals decision in the case of Cadila Pharmaceuticals Ltd. (supra) clearly brings out what is being done by the department.
5. We have considered the submissions of both sides. There is no dispute that P.P. Medicament are covered by Section 4A of the Central Excise Act, 1944. There goods have been notified under Section 4A (1) vide Notification No. 2/2005- CE (N.T.) dated 07.01.2005, which reads as under:-
Medicaments Assessments on basis of retail sale price (MRP) In exercise of the powers conferred by sub-section (1) and sub-section (2) of section 4A of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby specifies the goods mentioned in column (3) of the Table below and falling under Chapter or Heading No. or Sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) mentioned in the corresponding entry in column (2) of the said Table, as the goods to which the provisions of the said sub-section (2) shall apply, and allows as abatement the percentage of retail sale price mentioned in the corresponding entry in column (4) of the said Table:-
TABLE S. No. Chapter or Heading No. or Sub-heading No. Description Abatement as a percentage of retail sale price (1) (2) (3) (4) 1 3003. 10 Patent or proprietary medicaments, other than those medicaments which are exclusively Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic 35%
2.
3003. 20 Medicaments (other than patent or proprietary) other than those which are exclusively used in Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic systems 35%
2. This notification shall come into force on the 8th day of January, 2005.
Explanation - For the purposes of this notification, retail sale price means the retail price displayed by the manufacturer under the provisions of the Drugs (Prices Control) Order, 1995.
6. We also note that Durg (Price control) Order, 1995 in paragraph 7 specifies how the retail price of formulation is to be determined. Further paragraph 8 of the said order empowers the Government to fix the retail price of a scheduled formulation in accordance with paragraph 7. Further paragraph 9 of the said order empowers Government to fix ceiling price of scheduled formulations. Further paragraph 14 provides for Carrying into effect the price fixed or revised by the Government, its display and proof thereof. Sub-paragraph (2) of the said paragraph reads as under :-
14. Carrying into effect the price fixed or revised by the Government, its display and proof thereof:
2. Every manufacturer, importer or distributor of a formulation intended for sale shall display in indelible print mark, on the label of container of the formulation and the minimum pack thereof offered for retail sale, the retail price of that formulation, notified in the Official Gazette or ordered by the Government in this behalf, with the words retail price not to exceed preceding it, and local taxes extra succeeding it, in the case of Scheduled formulations.
Provided that in the case of a container consisting of smaller saleable packs, the retail price of such smaller pack shall also be displayed on the label of each smaller pack and such price shall not be more than the prorata retail price of the main pack rounded off to the nearest paisa.
7. From the above, it is clear that requirement of displaying the retail price is only for the goods intended for sale. Since, physician samples are not intended for sale, requirement to indicate the retail sale price does not exist, in the law.
8. We also note that this Tribunal has been taking a view that physician samples manufactured on principal to principal basis are required to be assessed under Section 4 (1) (a) of the Central Excise Act as is evident form the various case laws quoted by Ld. Counsel for the appellant.
9. In view of above analysis, all the four appeals are allowed.
(Pronounced in court on ..10.2013) (S.S. Kang) (P.K. Jain) Vice President Member (Technical) Sp Section 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 their value, then, on each removal of the goods, such value shall -
(a) in a 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, be the transaction value;
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.
Section 4A - Valuation of excisable goods with reference to retail sale price. -
(1) The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Legal Metrology Act, 2009 (1 of 2010) or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-section (2) shall apply.
(2) Where the goods specified under sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette.
(3) ----------.
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