Indirect Tax

Report No. 11 of 2010 - Performance Audit of Excise Duty on Pharmaceutical Products (Indirect Taxes - Central Excise)

Date on which Report Tabled:
Fri 06 Aug, 2010
Date of sending the report to Government
Government Type
Union Department
Indirect Tax
Sector Taxes and Duties


We conducted a performance audit on levy of excise duty on pharmaceutical products (Chapter 30 of Central Excise Tariff Heading) to evaluate the adequacy of provisions of the Act, Rules and instructions in ensuring proper assessment, collection and allocation of revenues. We found a few system and compliance weaknesses relating to the assessment and collection of duty.

Assessment of allopathic physician samples was based on transaction value under section 4 instead of on MRP based value under Section 4A. To ensure uniformity, the Government may consider amending the Act and the Rules to provide for a uniform system of assessment of medicines cleared as physician sample or for trade. In 38 such cases, we found Rs. 5.67 crore of revenue has been foregone.

Ayurvedic and Homeopathic products are not covered by MRP based assessment under section 4A although they were sold at MRP. To check against the undervaluation of Ayurvedic and Homeopathic products, the Government needs to bring these commodities under MRP based assessment (section 4A). In 26 such cases, we found that Rs. 37.79 crore of revenue has been foregone.

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