Case: Madley Pharmaceuticals Ltd Vs. The Commissioner of Central Excise &amp; Customs, Daman &amp; Another

Juris Secundum, Vol. LVII, pp. 1067-68.)” 34. It is settled law that this Court should follow an earlier decision that has withstood the changes in time, irrespective of the rationale of the view taken. It was held by a Constitution Bench in the case of Waman Rao v. Union of India, (1981) 2 SCC 362 : “40. It is also true to say that for the application of the rule of stare decisis, it is not necessary that the earlier decision or decisions of longstanding should have considered and either accepted or rejected the particular argument which is advanced in the case on hand. Were it so, the previous decisions could more easily be treated as binding by applying the law of precedent and it will be unnecessary to take resort to the principle of stare decisis. It is, therefore, sufficient for invoking the rule of stare decisis that a certain decision was arrived at on a question which arose or was argued, no matter on what reason the decision rests or what is the basis of the decision. In other words, for the purpose of applying the rule of stare decisis, it is unnecessary to enquire or determine as to what was the rationale of the earlier decision which is said to operate as stare decisis. ...” 35. Now we may notice the decisions on which reliance placed by learned Senior Counsel Mr. Ganesh. In Delhi Cloth and General Millsv. Joint Secretary, 1978 (2) ELT (J121) (Del. HC), the question before the Court was whether calcium carbide, which does not comply with regard to purity and packaging with statutory rules answers the test of ‘Marketability’. The Court on facts has found that the calcium carbide manufactured by the company was for further utilization in the production of acetylene gas was not of purity that rendered it marketable nor was it packed in such a way as to make it marketable that is to say, in air tight containers. The Court has further noticed that the commodity in question would require further processing to make it marketable and therefore, the commodity in question is not marketable and hence, not excisable. 36. Reliance is placed on the decision of CESTAT in Amar Lalv. CCE, (2004) 172 ELT 466. That was a case where assessee manufactured a new drug for trial which were supplied for clinical trials. In view of the Drugs Control Act and the Rules framed thereunder, any drug could be marketed only after successful clinical trials and after approval and licence from Drugs Controller. Hence, the Tribunal held that the drug supplied free for clinical trials is not excisable Goods as it cannot be bought and sold at that stage. 37. In Pfizerv. Commissioner of Central Excise, 2002 (146) ELT 477, the question before the Tribunal was, whether excise duty is leviable on ‘Sugar syrup’ manufactured by the assessee for use in the manufacture by it for cough syrup. The Tribunal, while answering the issue, has stated that since the sale of Sugar Syrup containing artificial sweetener sodium saccharin would contravene the provisions of Prevention of Food Adulteration Rules, the Goods cannot be considered as marketable. 38. In Hindustan Petroleum Corporation Ltd.v. CCE, (2007) 210 ELT 407 (CESTAT), it was a case where assessee manufactured ‘diesel stem’ by refining the sour crude for captive consumption and sale in the market. The sale of ‘diesel stem’ containing high sulphur content was prohibited by Ministry of Petroleum and Natural Gas in the light of the notification issued by Ministry of Environment and Forest for preventing environmental pollution caused by emission due to burning of sulphur along with fuel. In the light of the notification issued by Ministry of Environment & Forest, the ‘diesel stem’ in its high content of sulphur is incapacitated from being sold in the market. In other words, this inherent incapability in the ingredients of the Goods, from being sold in the market makes it non-marketable and hence not excisable. 39. In Himalaya Drug Companyv. C.C.E., (2005) 187 ELT 427 , the question before the Tribunal was, whether the excise duty is leviable on ‘vegetable extracts’ manufactured by the assessee for use in the manufacture of Ayurvedic, Unani or Siddha Medicines. The Tribunal, while answering the issue, concluded that such vegetable extracts, unless subjected to preservative process, are not liable to be considered as Goods attracting excise duty and such Goods should be considered as only intermediary Goods. Further, in view of the fact that the licence issued by the Drug Controller prohibits assessee from selling such semi finished products. Therefore, the Tribunal concluded that such intermediary or semi-finished Goods manufactured by assessee cannot be compared with the products manufactured by others for sale, for the purpose of ‘marketability’. 40. In our considered view, the reliance placed by the learned Senior Counsel for the appellant on some of the decisions of the Tribunal would not assist him in support of his submission for the reason that the goods therein were not marketable and hence, excise duty was not leviable, not because of any statutory prohibition for the sale of the goods, but because they had not reached the stage of satisfying the test of marketability of the goods. 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 Excisev. M/s. Bal Pharma, Civil Appeal No. 1697 of 2006. 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, Calicutv. Trinity Pharmaceuticals Pvt. Ltd.,reported as 2005 (188) ELT 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.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]28. We agree with Mr. Ganesh, learned Senior Counsel for the appellant, that the manufacture of patent and proprietary drugs is completed only after the labelling is completed, for the purpose of levy of excise duty. However, on a perusal of the labelling provisions in the Drug Rules, we find that they deal with the name of drug, contents of the drug, name and address of manufacturer, a distinctive batch number (details of manufacture of drug is recorded and available for inspection as a particular batch), preparation of drug, date of manufacture and date of expiry of drug, its storage conditions, etc., which are in aid of the object of the Act, viz. promoting the use of good quality drugs, and ensuring that drugs that do not live upto quality do not find their way into the market. Rule 96(1)(ix) of the Drug Rules on which Mr. Ganesh heavily relies in support of his submission, states that while complying with the labelling provisions under Clauses (i) to (viii) of Rule 96 (1), the manufacturer must further overprint on the labelSample - Not to bein case they are to be distributed free of cost as physicians samples. Further, the bare perusal of Rule 96 shows that its heading bears ‘Manner ofand Clause 1 of this Rule contemplates or govern the manner of labelling in a way that the particulars on the label of the container of a drug shall be either printed or written in indelible ink and shall appear in conspicuous manner. This gives ample clarification that the process of labelling is distinct or different from the overprinting on the label of asample, and hence we are unable to agree with him that the manufacture for the purpose of the Central Excise Tariff Act is not completed until ‘PhysiciansSample - Not to beis printed on the label.29. The primary reason of distributing free physician samples by the manufacturer of pharmaceutical drugs to us appears to be only for the purpose of advertising of the product and thereby enhancing the sale of the product in the open market. It has been shown by research that the market of a pharmaceutical company is enhanced substantially by the distribution of free physician samples. In other words, the distribution of such physician samples serves as a marketing tool in the hands of the pharmaceutical companies [See Sarah L. Cutrona et al., Characteristics of Recipients of Free Prescription Drug Samples : A Nationally Representative Analysis,(2008) 98 Am. J. Pub. Health 284].30. Before we conclude, in our view, the issue raised in these appeals is no more res integra. This issue came up for consideration before this Court in the case of Ranbaxy Laboratories Ltd.v. Commissioner of Central Excise, Pune, (2003) 9 SCC 199, wherein it wasIn these appeals, the question is whether free medical samples supplied to the doctors are liable to excise duty. In our view, this question is answered by a decision of this Court rendered today in Civil Appeal No. 3643-44 of 1999.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 Excisev. M/s. Bal Pharma, Civil Appeal No. 1697 of 2006. This Court has upheld the conclusion of the Tribunal that thesamples 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, Calicutv. Trinity Pharmaceuticals Pvt. Ltd.,reported as 2005 (188) ELT 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.