Case Law Details

Case Name : Elvina Pharmaceuticals Ltd. Vs Commissioner of Central Excise (CESTAT Bangalore)
Appeal Number : Central Excise Appeal No. 1665 of 2011
Date of Judgement/Order : 31/10/2023
Related Assessment Year :

Elvina Pharmaceuticals Ltd. Vs Commissioner of Central Excise (CESTAT Bangalore)

Introduction: The case of Elvina Pharmaceuticals Ltd. vs. Commissioner of Central Excise (CESTAT Bangalore) revolves around the valuation of physician samples under the Central Excise Act. The appeal challenges the order dated 17.3.2011, wherein demands for a differential duty of Rs. 7,33,036/- were confirmed for the period from October 2007 to May 2008. The appellants, manufacturers of P & P Medicines, cleared physician samples by discharging duty at 110% of the cost of production, a method contested by the Revenue.

Detailed Analysis: The core contention revolves around the correct method of valuation for physician samples. The Revenue, citing the recent judgment of the Tribunal in the case of M/s. Amazon Drugs Pvt. Ltd. vs. CCE, Bangalore, argues that valuation must be done under Section 4 of the Central Excise Act, 1944, read with Rule 4 of the Central Excise (Valuation) Rules, 2000. The Tribunal, relying on the Larger Bench’s decision in Cadila Pharmaceuticals Ltd. vs. Commr. of C.Ex. Ahmedabad-II and the Supreme Court’s ruling in Medley Pharmaceuticals Ltd. vs. Commr. of C. Ex. & Cus., Daman, held that the physician samples should be valued on a pro-rata basis.

The Tribunal further emphasized that the valuation method under Rule 8 of the Central Excise (Valuation) Rules, 2000, as adopted by the appellants, is contrary to the law laid down by the Supreme Court. The judgment of the Supreme Court in Medley Pharmaceuticals case, supporting the pro-rata valuation of physician samples, has been reiterated by the Tribunal in the present case, following its earlier decision in Amazon Drugs Pvt. Ltd.

Conclusion: In conclusion, the Tribunal upheld the order, dismissing the appeal on the grounds of merit. The decision reinforces the principle that the valuation of physician samples for the purpose of excise duty must be in accordance with Rule 4 of the Central Excise (Valuation) Rules, 2000, as interpreted by the Supreme Court. This case sets a precedent and clarifies the correct method of valuation for similar disputes, providing clarity for pharmaceutical manufacturers and ensuring compliance with excise duty regulations.

FULL TEXT OF THE CESTAT BANGALORE ORDER

This appeal is filed against the Order-in-Appeal No. 29/2011 dated 17.3.2011 passed by the Commissioner of Central Excise (Appeals), Mangalore.

2. Briefly stated the facts of the case are that the appellants are manufacturers of P & P Medicines falling under Chapter Sub Heading 3003.10.00 of Central Excise Tariff Act, 1985. They manufacture the said goods on loan license basis for M/s. Wallace Pharmaceuticals Ltd. During the relevant period i.e. from October 2007 to May 2008, they cleared physician samples by discharging duty @ 110% of the cost of production. Alleging that the method of valuation adopted by the appellant is not correct as the said physician samples cleared attracts valuation under Section 4/4A of Central Excise Act, 1944. Show-cause notices were issued on 20.10.2008 for the period from October 2007 to May 2008 demanding differential duty of Rs. 7,33,036/- with interest and proposal for penalty. On adjudication demands were confirmed. Aggrieved by the said order, they filed appeal before the Commissioner (Appeals). Hence the present appeal.

3. None present for the appellant despite notice. Heard the learned AR for the Revenue. The learned AR for the Revenue submitted that even though the notices were sent to the appellant in the past fixing the date of hearing on 6.10.2023, none appeared for the appellant nor there was any request for It is his contention that further adjournment will not yield any result. Consequently, the appeal is taken for hearing on the basis of records and after hearing the learned AR for the Revenue.

4. Learned AR submits that the issue of valuation of physician sample is no more res integra and covered by the recent judgment of Tribunal at Bangalore in the case of M/s. Amazon Drugs Pvt. Ltd. Vs. CCE, Bangalore vide Final Order No. 20687/2023 dated 14/07/2023. He submits that the Tribunal taking note of the principle of law settled by the Larger Bench of the Tribunal in the case of Cadila Pharmaceuticals Ltd. Vs. Commr. of C.Ex. Ahmedabad-II 2008 (232) E.L.T. 245 (Tri.-LB) and Hon’ble Supreme Court in Medley Pharmaceuticals Ltd. Vs. Commr. of C. Ex. & Cus., Daman – 2011 (263) E.L.T. 641 (S.C) held that the physician samples cleared adopting Rule 8 of the Central Excise (Valuation) Rules, 2000 is contrary to the law laid down by the Hon’ble Supreme Court and the correct method of valuation is under Section 4 of Central Excise Act, 1944 read with Rule 4 of the Central Excise (Valuation) Rules, 2000. He submits that the appeal is thus liable for dismissal.

5. We have carefully considered the grounds of appeal and submissions of appellant advanced by the learned AR for the Revenue. The short issue for determination is, whether the valuation of physician sample be in accordance with Rule 8 or Rule 4 of the Central Excise (Valuation) Rules, 2000. We find that the Hon’ble Supreme Court in Medley Pharmaceuticals case (supra) has laid down the principle as follows:

41. Now coming to the valuation of the physician samples for the purpose of levy of excise duty, in our view, this issue need not detain us long in view of the decision of this Court in the case of Commissioner of Central Excise v. M/s. Bal Pharma [Civil Appeal No. 1697 of 2006] [2010 (259) E.L.T. 10 (S.C.)]. This Court has upheld the conclusion of the Tribunal that the physician’s samples have to be valued on pro-rata basis. The Tribunal, while arriving at the aforesaid conclusion, had relied upon its earlier decision in the case of Commissioner of Central Excise, Calicut v. Trinity Pharmaceuticals Pvt. Ltd., reported as 2005 (188) E.L.T. 48, which has been accepted by the department. Therefore, we hold that physician samples have to be valued on pro-rata basis for the relevant period.”

5.1 This principle has been followed by this Tribunal in Amazon Drugs Pvt. Ltd. and it is observed as follows:

“14. Thus, the contention of the appellant before the Supreme Court that the free physician samples have to be assessed on the cost of manufacture plus 15% profit as contemplated under rule 8 of the 2000 Rules was not accepted by the Supreme Court.

15. In the present appeal, the appellant has also determined the valuation under rule 8 of the 2000 Rules by adding 15% profit to the cost of manufacture. Such a determination of the assessable value has not been accepted by the Supreme Court. The Commissioner (Appeals), therefore, committed no illegality.”

6. We do not find any reason not to follow the judgment of this Tribunal in Amazon Drugs Pvt. Ltd’s case. Consequently, following the said judgment, the impugned order is upheld and the appeal being devoid of merit, accordingly is dismissed.

(Operative portion of the Order was pronounced in Open Court.)

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