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1. All these appeals, which have a common, issue but different facts are taken up for disposal together 'Physician Samples' are distributed free by pharma companies/firm to medical practitioners. Since they are not sold their value has to be determined in accordance with the Central Excise Valuation Rule 1975 or 2000 depending on the period involved. Most Pharma Companies/firm Preferred 'Cost Construction' method envisaged under Rule 6b(ii) of Central Excise Valuation Rule 1975. In the beginning the disputes pertained to issues like whether or not all the elements of cost have been included or whether element of profit has been added to the cost of the product etc. But alter the Department questioned the applicability's of Rule 6b(ii) itself in a situation where the value of comparable goods to physician samples is available. The Department's contention is that where the value of comparable goods is available it should be adopted for the purpose of arriving at the value of physicians samples after allowing proper adjustments. The department has also been of the view and correctly so, that Rule 6b(ii) come into picture only when value cannot be determined under Rule 6b(i) of Customs Valuation Rules 1975. After the introduction of new Central Excise Valuation Rules 2000 the position underwent a change. The CBEC in its Circular No. 643/34/2002-CX dt. 1.7.2002 clarified that the value physicians' sample be determined under Rule 11 read with Rule 8 whereby the Value of physicians' samples would be 115% of the cost of production of such samples.

2. All the appeals pertained to valuation of Physician Samples. The periods involved are different though. With this preface we proceed to deal with the appeals. We have heard both sides and considered the various submissions made.

Appeal No. E/1820/99

3. The appellants have been, during the period under dispute, filing price lists both for trade packs of medicines and physician samples. They have arrived at the value of the physician samples' adopting cost construction method. The department was aware of this situation. The appellants therefore claim, that there was no suppression of facts in so far as the value of the physician samples is concerned. The department therefore cannot invoke larger period of limitation while demanding duty. It is argued that the departments contention that the appellants should have adopted the value of comparable/similar goods cleared by them for the purpose of determining the value of physicians samples even I has merit, the demand is time barred.

E/3658/04

6. Issue pertains to Valuation of physician samples distributed free to medical practitioners. The period involved is March 2003 to January 2004.

7. The new Central Excise Valuation Rules 2000 were introduced w.e.f. 1.72000 the appellants case is covered under these Rules.

8. The CBEC vide its Circular No. 643/34/2002-CX dt. 1.7.2002 clarified that since physician samples are not sold Section 4(1)(a) will not apply and recourse will have to be taken to the Valuation Rules. It is clarified that no specific Rules in the new Central Excise Valuation Rules, 2000 covers a situation of this type as except Rule 8 all other Rules, cover contingencies where sale is involved in some form or the other. The Board therefore opines that the residuary Rule 11 will have to be adopted along with the spirit of Rule 8 to arrive at the value of physician samples. In other words the assessable value has to be arrived at 115% of the cost of production of the samples. This is what exactly the appellants were doing, while arriving at the value of physician samples. The Commissioner's order that the value should be arrived at on a basis other than the one contained in the CBEC Circular (supra) is totally unacceptable. Any demand worked out on the basis different from the one contained in Board's clarification in this regard does not have force of law.

E/1127/97 & E/1821/97, E/1273, 1274, 1396/04 and E/3657/05

15. The issue is one of valuation of physician samples. The period involved in all the appeals is prior to 2000 when Central Excise Valuation 1975 were in vogue. The appellants arrived at the value of physician samples by cost construction method the department however contends that proportionate value of trade packs of medicines should be the basis for assessment under Rule 6b(ii). Hence these appeals.

16. The appellants contended that (a) Cost of Physician Samples is included in the trade pack and therefore the cost of physician samples should be zero; (b) Alternatively value arrived at on Cost Construction basis should be accepted; (c) Proportionate value ascribed to the physician samples is irrational (d) Cost of advertisement and other expenses are not incurred in the case of physician samples (e) By arriving at the value of physician samples under Rule 6(b)(i) the Department seeks to tax the same goods twice (f) The ratio of Cheryl Labs decision cannot be applied as that case was decided on the basis of an admission by the appellant that Valuation is required to be done under Rule 6 of Central Excise Valuation Rules, 1975 and (g) In any case no penalty should have been imposed when the issue pertains to one of valuation of excisable goods.