Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
Circular No. 915/05/2010-CX
New Delhi, 19th February, 2010.
To
Director General (All)
Chief Commissioners of Central Excise including LTU (All)
Commissioners of Central Excise including LTU (All)
Subject: - Clarification regarding valuation of free samples of the products
covered under MRP based assessment – reg
Sir,
Attention of field formations is invited to Board’s circular No. 813/10/2005-CX
dated 25.4.2005 issued from F.No. 6/39/2000- CX1 wherein it was clarified that
in the case of free samples, the value should be determined under Rule 4 of the
Central Excise Valuation (Determination of Price of Excisable Goods) Rules,
2000.
- A larger bench of CESTAT in the case of Blue Cross Laboratories Vs CCE,
Mumbai 2006(202) ELT 152 (T-LB), has also held that physician samples are to be
assessed under rule 4 of the Central Excise Valuation (Determination of Price of
Excisable Goods) Rules, 2000. Further, the aforesaid circular of 2005 has also
been upheld by the Hon’ble High Court of Mumbai in the case of Indian Drugs
Manufacturer’s Association Vs. UOI, reported at 2008(222) ELT 0022 (Bom).
- Subsequently, CESTAT in its majority decision in the case of M/s Cadila
Pharmaceuticals Ltd. Vs Commissioner of Central Excise Ahmedabad II, reported at
2008 (232) ELT 0245 (Tri.-LB), has held that even after the pharmaceutical
products have been notified for MRP assessment under Section 4A of the Central
Excise Act, the assessment of free physician samples of these products , is
appropriately required to be done under Rule 4 of the valuation rules by taking
into consideration the deemed value under Section 4A(1) notwithstanding the non
availability of normal price under Section 4(1)(a) of the Act, ibid.
Accordingly, the value for payment of excise duty for physician sample would be
the value determined under Section 4A for the similar goods (subject to
adjustment for size & pack etc.)
- The aforesaid decision of CESTAT would, mutatis mutandis, be applicable in
respect of free samples of other products which are under MRP assessment.
Accordingly, it is clarified that valuation of Samples which are distributed
free as part of marketing strategy, or as gifts or donations, shall be
determined, in terms of Board’s circular No. 813/10/2005-CX dated 25.4.2005 and
the aforesaid decisions of CESTAT, as explained in foregoing paras 2 & 3,
whether the final products are assessed under MRP based assessment or otherwise.
- Trade and Industry may be informed.
- Receipt of this circular may be acknowledged
- Hindi version would follow.
Yours faithfully,
(MADAN MOHAN)
Under Secretary (CX. 1)
F No. 6/5/2009-DS (CX-I & 4)