GOVERNMENT OF INDIA

MINISTRY OF FINANCE

OFFICE OF THE COMMISSOINER OF CENTRAL EXCISE : CHENNAI III :

26/1, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034 

 Subject :- Bombay High Court O.O.C.J  Writ Petition No. 240/2006.  Indian

                   Drug Manufacturers Association Vs. Union of India & Others.

                                  ***********

       Copy of Board's letter F.  No. 280/15/2006-CX.8A dated 6^th December, 2006 enclosing a copy of the Judgment of the Bombay High Court in case O.O.C.J Writ petition No. 240/2006 – Indian Drug Manufacturers Association Vs. Union of India is communicated herewith for information and necessary action.

           In this case the Bombay High Court has dismissed the writ petition on the grounds that the arguments of the petitioners that the Physicians Samples are distinct from the goods sold in the market is without any merit.  It has been held that it is just and proper to hold that the valuation of physicians samples should be determined under Rule 11 read with Rule 4 of Valuation rules 2000.

           The contents of the trade notice may be brought to the notice of all concerned.

                     (Issued from file C.No. IV/16/1/2007-Tech)

                                                                                                                                                                                                                                                              Sd/-

                                                                                   (S. KANNAN)

                                                   ADDITIONAL COMMISSIONER (TECH)

 To

As per Mailing List (Both Department & Trade)

 COPY OF  BOARD'S LETTER F.NO.280/15/2006-CX 8A DATED 6^TH DECEMBER, 2006.

                      Subject:  Bombay High Court O.O.C.J  Writ Petition No. 240/2006. 

    Indian Drug Manufacturers Association Vs. Union of India &  Others.

 A copy of Bombay High Court Judgment order dt. 28.09.2006 in the writ petition is forwarded herewith. 

2.                 In the aforesaid case, the petitioner ie.  Indian Drug Manufacturers Association had filed petition to challenge the validity of Circular No. 813 dt.  25.4.2005 issued by the CBEC, New Delhi.  By the said Circular, the Board has clarified that the valuation of the free samples be made under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods)  Rules,  2000.  Vide the said petition, the petitioner contended that the valuation of physician free samples may be done under rule 11 read with Rule 8 of the Central Excise Valuation Rules, 2000 as indicated in Circular No. 643 dt. 01.07.2002

3.                 (i) The High Court of Bombay has dismissed the writ petition vide its order dt.  28.09.2006 on the grounds that the argument of the petitioners that the physicians samples are distinct from the goods sold in the market is without any merit.  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 difference from the goods sold in the open market.  The difference in the size of quantity may entitle the assessee to some adjustment in the value.  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 physicians free samples have to be determined under Rule 4 by applying the valuation of such goods sold in the open market.

 3. (ii)  Further, the Court has observed that 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.  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 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 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.

 4.                 This is for your information and necessary action please.

 Encls:  As stated

                                                                                           Sd/-

                                                                                  (Simmi Jain)

                                                                        Deputy Secretary(Legal)