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16. Mr. Rana further submitted that Rule 4 of 2000 Rules is the proper rule applicable for valuation of physicians free samples because usage of the term physicians sample' itself implies that these samples are representative of the whole i.e. 'such goods' sold commercially. The purpose of physicians samples is to promote the goods which are introduced in the market or being introduced in the market. Therefore, the physicians samples and the goods sold in the market are same, they are liable to be valued under Rule 4 of 2000 Rules. Rule 8 applies to goods captively consumed in the manufacture of final products. Since the physicians samples are final products, Rule 8 cannot be applied to physicians free samples. The circular No. 643 dated 1/7/2002 issued by the Board to the effect that the physicians free samples be valued by applying the spirit of Rule 8, was erroneous and, therefore, the mistake has been rectified by the Board by issuing the impugned circular No. 813 dated 25/4/2005 clarifying that the physicians free samples be valued as per Rule 4 instead of Rule 8 of the 2000 Rules. Accordingly, Mr.Rana submitted that the petition is devoid of any merit and the same is liable to be dismissed.

27. In our opinion, Rule 4 squarely applies to the clearances of physicians free samples, because, physicians samples are not clearances by way of sale and delivery at the time and place of removal and such goods meaning thereby goods similar or identical to physicians samples are also sold and delivered at the time and place of removal. By the very nature, the physicians samples have to be strictly identical to the goods which are cleared on sale in the wholesale trade. In fact, by distributing physicians samples freely, the assessee represents to the physicians that the product same physical and chemical properties, composition, potency, etc. Thus, the physicians samples cleared for free distribution are liable to be valued under Rule 4 on the basis of the value of such goods sold and delivered at any other time nearest to the time and place or removal of the physicians samples.

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 was 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 Page 3010 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.

33. Assuming that the petitioners are right in contending that the valuation of the physicians samples cannot be determined under any of the specific rules, even then, as per Rule 11 the value of physicians samples has to be determined by using reasonable means consistent with the principles and the general provisions of 2000 Rules and Section 4(1) of the Act. As stated earlier, Rule 4 is the only general rule and, therefore, it is just and proper to hold that the valuation of physicians 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 contention that the physicians samples must be valued under Rule 11 read with Rule 8 cannot be accepted because, Rule 8 applies to cases where the goods are not sold but are captively consumed whereas, goods similar to physicians samples are in fact sold in the open market and in fact physicians samples are not cleared for captive consumption. Hence the valuation of physicians samples cannot be determined under Rule 11 read with Rule 8 of the 2000 Rules.