JUDGMENT
Gowri Shankar, Member (Technical)
1. M/s Okasa Pharmaceuticals Ltd (Okasa for short) is the manufacturer of pharmaceutical products. By an agreement entered into on 18th December, 1992, it entered into an arrangement with Cipla Ltd (Cipla for short). Okasa was to sell to Cipla the products mentioned in the Schedule in the agreement for sale by the latter at the prices mentioned thereof subject to a maximum variation of 10%. Cipla was to undertake sales promotion activity at its discretion and was permitted to sell the products in any manner and at any rate. The agreement contained a provision for Okasa to sell the products directly to any other party or department. There were provisions for termination of the agreement at the option of either party. This agreement was substituted on 30.3.1994 by another agreement which contains essentially the same terms and conditions. Against this background, we will consider the two appeals, one Okasa and other by the department.
2. We are concerned in appeal E/1309/96 by Okasa with the valuation of physician’s samples packed as Novamox dry syrup. The appellant sold 30 millilitre packs of this product, whether as physician sample or a tradable product at the price of Rs. 6.47. This is the price mentioned in the Schedule to the agreement. Initially, in the price list filed on 15.4.1993, it had indicated the assessable value of Rs. 8.09 for each such bottle, whether intended for sale or as physician’s samples. This, it appears, was done on its understanding that the assessable value would be the price at which Cipla sold the goods. Subsequently, in the price list dated 2.7.1993 it indicated the value of the physician sample of this pack to be Rs. 6.47. It however apparently continued to indicate the assessable value of the same product for sale at the earlier price of Rs. 8.09. The department refused to accept the lower price for the physician sample on the ground that it was not possible to have two values of the same commodity. The Assistant Collector confirmed the proposal in the notice seeking to modify the price list and demanding duty on clearances already made and this order was confirmed by the Collector (Appeals).
3. The contention of the counsel for the appellant is simple. It is that the price of Rs. 8.09 for the trade pack was erroneous. The error was in fact corrected in the price list filed in May 1994. By that price list, the assessable value for the trade pack was shown to be Rs. 6.47. The fact that the appellant wrongly claimed higher price for the trade pack should not preclude from its exercising the right to claim the correct value for the sample.
4. The departmental representative reiterates the reasoning of the Commissioner (Appeals) which is that there cannot be two prices for the same commodity.
5. When the price list was filed in May 1994 for Novamox and other medicament manufactured by Okasa, it showed, not the earlier value based on the price of Okasa but the price at which Cipla sold the goods. The notice issued proposing not to accept that price and applying the earlier higher price that the manufacturer had shown. The notice alleged that the price at which Okasa sold the goods to Cipla was not the normal price. It sought to determine the price by applying the third clause of the proviso under Sub-section (1) of Section 4. This proviso provides that the assessable value of goods generally sold by the assessee to or through a related person shall be the normal price at which that related person sells the goods to a dealer. The Assistant Collector confirmed the proposal. On appeal from this order, the Commissioner (Appeals) held that this proviso three will not apply. He found that there was no relationship established between Okasa and Cipla.
6. The challenge to this order in the department’s appeal (E/2098/00) is on the ground that there is no sale at the factory gate of Okasa and there is only a stock transfer to Cipla’s warehouse. The price in the agreement between the two parties is therefore not normal price within the meaning of Section 4. The agreement between the two indicates that the relationship is principal to agent or master or employer to employee. It is alleged that Cipla had exercised over all control over the manufacture of goods by Okasa, which had liberty to sell the goods to any other buyer. The decision of the Tribunal in Pawan Biscuits v. CCE 1991 (53) ELT 595 is relied upon.
7. The grounds in the department’s appeal totally disregard the terms of the agreement. The departmental representative is not able to show anything in this agreement by which any degree of control by Cipla over Okasa can be shown. The agreement is nothing more than an agreement for sale and has no reference to manufacture. The raw material are not supplied by Cipla. There is no provision in the agreement even for a visits for any purpose of Cipla’s employees to the factory of Okasa. Clause 11 of the agreement specifically mentions Okasa may sell the goods directly to any other party or department. There is therefore nt the slightest material to show that the two are related. The decisions of the Tribunal Pawan Biscuits v. CCE will have no application (apart from the fact that this decision has been overruled by the Supreme Court). It is also not possible to agree that there is no sale of goods. Merely because there is a delivery in the depot of Cipla, we do not see why there is no sale or the sale price would not be the assessable value.
8. Appeal E/2098/06 is accordingly dismissed.
9. It will then follow that the price at which Okasa sold the goods to Cipla would form the correct assessable value. This therefore would cover the determination of the assessable value of the physician’s sample of Novamox. The fact that Okasa had wrongly furnished higher value for the trade pack to this commodity during the earlier period with which the other appeal E/1309/96 is concerned should not come in the way of its claiming the correct value for the physician’s sample.
10. Appeal E/1309/96 is accordingly allowed and the impugned order set aside.