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4. The petitioner, an incorporated company, is engaged in the manufacture of P.P. Ayurvedic Medicines falling under Chapter Heading No. 3003.30 of the Central Excise Tariff Act, 1985. They were clearing the physicians samples of the said ayurvedic medicines on payment of duty at the assessable value equivalent to the cost price. The Central Excise Department disputed the basis adopted by the petitioner for determining the assessable value equivalent to the cost of production. Accordingly, vide letter dated 26th July, 1995 the Superintendent, Central Excise, Panipat - respondent No. 5 herein, directed the petitioner to clear the samples by adopting a higher assessable value on pro-rata basis of the assessable value of the regular trade packs sold commercially, with a further direction to execute B-13 bonds for provisional assessments to be made in respect of further clearances. Immediately thereafter, on 28th July, 1995, a show cause notice was issued to the petitioner by the Assistant Commissioner Central Excise, Division Sonepat - respondent No. 4 herein, demanding duty difference for the period from January, 1995 to April, 1995, calculated on the affronted basis. Subsequently, on 25th October, 1995, yet another show cause notice, on the same ground, was issued by the said respondent for the subsequent period from May, 1995 to August, 1995, raising an additional demand. The petitioner filed replies to the show cause notices. Contesting the stand of the department that the assessable value of the physicians samples had to be determined in accordance with Rule 6(b) (i) of the Valuation Rules, it was pleaded that the samples were not liable to any excise duty as these were neither marketed nor marketable; the samples were nothing but advertisement material; cost of samples formed a component of the sale value of the medicines sold and this component of sale value bore excise duty as the other component and, therefore, charging of excise duty on the samples would amount to double taxation, which is not permitted under Article 265 of the Constitution.

"The clearances were made provisional w.e.f. 1.9.95 Show Cause Notices No. V(39)300-127/94/9668 dt. 29.9.94, No. V(40)30/343/95/2335 dt. 28.7.96 & No. Ce- 20/demand/Charak/PNP/95/10473 dt. 24.10.96 were issued which dealt with issue of valuation of physicians samples. The subject S.C. Ns. have since been adjudicated by the Dy. Commissioner vide O-in-O No. 2/98 dt. 19.2.98 and 209/97 dt.16.3.98 issued vide C. No. V(30)15/70-CE/96/226 dt.19.2.98 and C. No. V(40) 30/343/952335 and it has been decided that assessable value of physicians samples has to be on pro-rata basis and not the cost price as contended by the party.

In accordance with the above order-in-originals, I order that the assessment of the subject samples should be made on pro-rata basis for the period 1.9.95 to 31.1.98. Since the differential duty amounting to Rs.19,29,642/- on physicians samples has been worked out by the Range Office, Panipat, after adjusting the duty provisionally assessed against the duty finally assessed which is recoverable from the party as differential duty as detailed in the Annexure 'A' attached. Hence I order for the final assessment of the said provisional assessment of the party for the period 1.9.95 to 31.1.98 subject to the recovery of the differential duty of Rs.19,29,642/- for the above said period which was assessed provisionally."

16. From the facts in hand it is clear that the dispute with regard to the valuation of physicians samples originated on 26th July, 1995, when the petitioner was directed to clear the samples by adopting a higher assessable value. The first show cause notice, dated 28th July, 1995 covering the period from 1st January, 1995 to 30th April, 1995 and the second, dated 25th October, 1995 covering the period from 1st May, 1995 to 31st August, 1995, were ostensibly issued to raise and keep alive the demand for differential duty for the period which was already over. Since for the subsequent period commencing 1st September, 1995 the assessments on the basis of RT-12 were being made provisionally and the petitioner had started executing B-13 bonds with bank guarantees, pursuant to the directions contained in notice dated 26th July, 1995 and the same had been accepted by the department, it is axiomatic that it was not felt necessary to either issue show cause notices or raise additional demands for the subsequent period pending adjudication on the two show cause notices for the earlier periods. As a matter of fact, the letter/notice dated 26th July, 1995 by itself is tantamount to a show cause notice because it was by means of this letter/notice the department had objected to the method of valuation being adopted by the petitioner and had directed them to determine the assessable value of physicians samples on a different basis. The issue raised in the letter got crystalised in three orders - two passed on 16th March 1998 and the third on 17th September, 1998, when additional demands, for the differential duty covering the entire period from 31st January, 1995 to 31st January, 1998 were raised. It is evident from the order, dated 17th September, 1998, that provisional assessments were being made for the period commencing 1st September, 1995 and the petitioner was asked to furnish B-13 bonds and bank guarantees because of the pendency of final adjudication on the two show cause notices. Pending resolution of the stated dispute, all provisional assessments made under Rule 9B of the Central Excise Rules, 1944 in respect of all clearances between the period from 1st September, 1995 to 31st January, 1998 for which the petitioner had filed RT-12 returns, for whatever reason, were provisional for all intents and purposes and the issue in dispute was alive till final assessment in respect of the said period, as required to be made under Rule 173-I, was made on 17th September, 1998. The mere fact that order dated 17th September, 1998 was passed without any fresh show cause notice to the petitioner amply lends support to the stand of the petitioner that the letter issued on 26th July, 1995 by respondent No.5 (Superintendent, Central Excise, Range Panipat) directing the petitioner to pay duty on samples on the value thereof on pro-rata basis on the assessable value of regular trade packs, which were being sold commercially with immediate effect was in fact in the nature of a show cause notice as postulated in Section 87(m)(ii)(b) of the Finance Act in respect of all the clearance, including the period in question namely; from 1st September, 1995 to 31st January, 1998. Admittedly, the differential duty amounting to Rs.19,29,624/- for the said period was assessed finally vide order dated 17th September, 1998 and it remained unpaid on the date of making the declaration.