Sun Pharmaceuticals Industries Limited Vs C.C.E. & S.T.-Vadodara-ii (CESTAT Ahmedabad)
Introduction: The Central Excise and Service Tax Appellate Tribunal (CESTAT) Ahmedabad recently addressed a significant issue regarding the liability to pay excise duty on the valuation of physician samples of medicaments sold to dealers for free distribution to doctors. This case involves Sun Pharmaceuticals Industries Limited vs. C.C.E. & S.T.-Vadodara-ii and has far-reaching implications. In this article, we provide a detailed analysis of the case and its outcome.
The Central Issue
The primary question in this case revolves around whether the appellant is obligated to pay excise duty on the valuation under Section 4A concerning physician samples of medicaments. These samples are sold to dealers with the intention of free distribution to doctors, and they are explicitly labeled as “not for sale.” The key issue is whether the valuation should be governed by Section 4 or Section 4A of the Central Excise Act, 1944.
Appellant’s Argument
The appellant, represented by Shri A.B. Nawal, a learned Cost Accountant, asserts that the matter in question has already been resolved in their favor by the Hon’ble Supreme Court and the Tribunal in previous judgments. They cite several cases, including Commissioner of C. Ex. & CUS., Surat vs. Sun Pharmaceuticals Inds. Ltd. and Commissioner V. Sun Pharmaceutical Inds. Ltd., as precedents that support their position.
Revenue’s Counterargument
On the other side, Shri Ajay Kumar Samot, a learned Superintendent (AR) representing the revenue, reiterates the findings of the impugned order.
Tribunal’s Decision
The CESTAT closely examined the case and concluded that the valuation of physician samples, which are intended for free distribution to physicians and doctors, should not be governed by Section 4A but rather by Section 4 of the Central Excise Act. This determination is based on the fact that these samples are explicitly marked as “not for sale,” and no Maximum Retail Price (MRP) is affixed to them. Therefore, they cannot be considered for valuation under Section 4A, as this section is applicable to retail sale. Instead, the correct provision for valuation is Section 4, where excise duty is payable based on the transaction value. The CESTAT cited the Hon’ble Supreme Court’s judgment in Sun Pharmaceuticals Industries Ltd. (2015) to support this decision.
Conclusion
The CESTAT’s decision in the Sun Pharmaceuticals vs. C.C.E. & S.T.-Vadodara-ii case provides clarity on the valuation of physician samples for excise duty purposes. It confirms that such samples, explicitly marked as “not for sale,” should be valued under Section 4 of the Central Excise Act. This ruling reaffirms the principle that excise duty is payable on the transaction value between the manufacturer and the distributor for physician samples, even if these samples are ultimately provided to doctors free of cost. The judgment sets a clear precedent for similar cases in the future.
In light of this ruling and the previous decisions of the Hon’ble Supreme Court, the impugned orders are not sustainable, and the appeals have been allowed. This case serves as an important reference for the excise duty treatment of physician samples in the pharmaceutical industry.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
In all the appeals same issue is involved. Hence, all the appeals are taken up for disposal together.
1. The issue involved in the present case is that whether the appellant is liable to pay excise duty on the valuation under Section 4A in respect of Physician sample of Medicaments sold to the dealer for free distribution to the Doctors on which “not for sale” is mentioned or the valuation should be done under section 4 of the Central Excise Act, 1944.
2. Shri A.B. Nawal, Learned Cost Accountant appearing on behalf of the appellant at the outset submits that the issue in the appellant’s own case has been settled in their favour by the Hon’ble Supreme Court and this Tribunal in the following judgments:
