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3.7. As regards the imposition of redemption fine it is submitted that, since the goods are not available for confiscation, imposition of redemption fine is unsustainable. As regards the penalty imposed under Section 11AC and Rule 25, it is his contention that when the duty demand itself is not sustainable penalty cannot be imposed. In view of the above, it is prayed that the appeal be allowed by setting aside the impugned order.

4. The learned Special Consultant for the Revenue strongly refutes the arguments advanced by the learned counsel for the appellant. It is his submission that the promotional products supplied free-of-cost to the customers along with the catalogue products of the appellant are subject to Central Excise levy and the appellants has been paying Central Excise duty since 2002 in accordance with Boards Circular No. 643/34/2002 dated 01/07/2002. The said circular provided that in case of valuation of samples which are distributed free-of-cost as marketing strategy, regards will have to be given to Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and no specific rule covers such a contingency except Rule 8. All other rules cover contingencies where sale is involved. Therefore, the residuary Rule 11 will have to be adopted along with the spirit of Rule 8. In other words, the assessable value would be 115% of the cost of production of the manufactured goods. The above circular was superceded vide Circular dated 25/04/2005 wherein the Board clarified that in the case of free samples, the value should be determined under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. It is further argued that the dispute in valuation of free samples under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 has been resolved by the decision of the honble Bombay High Court and two Larger Bench decisions of this Tribunal. In the case of Indian Drug Manufacturers Association vs. Union of India 2008 (222) ELT 22 (Bom.) the honble Bombay High Court has held that Rule 4 is the only general Rule and, therefore, it is just and proper to hold that the valuation of the samples be determined under Rule 11 read with Rule 4 and such a valuation would be reasonable and consistent with the principles and the general provisions of the Rules and the Act. The honble High Court further held that application of Rule 11 read with Rule 8 applies to cases where the goods are not sold but are captively consumed whereas goods, similar to physician samples, are in fact sold in the open market and in fact physician samples are not cleared for captive consumption. The larger Bench of this Tribunal in the case of Blue Cross Laboratories Ltd. vs. Commissioner of Central Excise 2006 (202) ELT 182 held that if the value of excisable goods under assessment cannot be determined under sub-clause (i) of clause (b) of Rule 6, then only the costing method can be resorted to under sub-clause (ii) of sub-clause (b) of Rule 6, but not otherwise. Similarly, another Larger Bench decision of this Tribunal in the case of Cadila Pharmaceuticals Ltd. vs. Commissioner of Central Excise 2008 (232) ELT 245, relying on the decision of the honble Bombay High Court in the case of Indian Drug Manufacturers Association (supra) held that Rule 4 is the general rule and unless found to be inapplicable would govern the valuation of physician samples. It was further held that physician samples are not supplied for captive use for production or manufacture of any articles. They are final products like any medicines sold in regular packs and therefore, the method of valuation provided in Rule 8 cannot be applied for valuation of physician samples. In the same decision, a question arose, as to what is the value defined in Rule 2(c) of the said Valuation Rules which can be taken for the purpose of Section 4 of the Central Excise Act and the honble Tribunal held that the fact that medicines/medicaments are specified goods within the meaning of Section 4A of the Act would not make any difference for the MRP is to be treated as value of the goods i.e. deemed value in place of transaction value under Section 4 and this does not take the goods out of the pale of Rule 4. It is accordingly, contended that the value to be taken for determination of value of promotional packs under Rule 4 could be MRP of promotional products with suitable adjustments which has been done in the present case.

31. The fact that the Board had issued a Circular No. 643 dated 1/7/2002 directing that the physicians samples be valued under Rule 8 does not mean that the revenue cannot withdraw that circular even if it is found to be erroneous and issue a circular which is in consonance with the Act and the Rules made thereunder.

32. The argument of the petitioners that the physicians samples are distinct from the goods sold in the market is without any merit. As noted earlier, the physicians free samples must be similar or identical to the goods that are sold in the wholesale trade. If the physicians samples are not similar or identical to the goods that are sold in the wholesale trade, then the consequences will be disastrous, because, the physicians prescribe medicines based on the free samples supplied by the assessee. The fact that the physicians samples may be distributed in a different pack or in a different bottle would not make the physicians samples different from the goods sold in the open market. The difference in the size or quantity may entitle the assessee to some adjustment in the value, however, that would not make the physicians samples to be distinct from the goods sold in the open market. In other words, irrespective of the fact that the physicians samples are distributed in a pack different from the pack that is sold in the market, the valuation of the physicians free samples have to be determined under Rule 4 by applying the valuation of such goods sold in the open market.