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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:-

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.