LI Research
Published on: 22 March 2023 at 13:13 IST
Supreme Court Bench of Justice Krishna Murari Clarified that, “Mere affixation of the MRP on a good does not qualify it to claim benefits under Section 4(A) of The Central Excise Act, 1944, and that there must be a “requirement” for the affixation of such MRP. Therefore, even if there is affixation of MRP in the goods, what must be looked at it is whether such affixation was mandated by law”.
Supreme Court said, “We have heard the counsels appearing on behalf of the Appellant in great detail. We must, however, mention that despite several opportunities being afforded to the Respondent and the counsel for the respondent being served the notice, and the matter being called multiple times, none appeared before this Court”.
“The Respondent, due to the tax assessment being less under Section 4(A) of the Act, is seeking benefit under the same, however, due to the assessment under Section (4) of the Act being more, the Appellant is claiming for the assessment to be done thereunder. This appeal, therefore, fundamentally depends on the interpretation of Section 4(A) of the Act”.
“The primary question posed in front of us today is only one, whether the goods sold by the respondent are eligible to claim tax benefits within the purview of the abovementioned notification under Section 4(A) of the Central Excise Act?
“In the case of Jayanti Food Processing Pvt. Ltd. v. Commissioner of Central Excise, Rajasthan1 , this Court, while deciding on a similar issue, held that for goods to be included under the assessment of Section 4(A) of the Central excise Act, it must comply with five factors. The relevant paragraph of the judgment is being reproduced herein:
“….Even at the cost of repetition the following would be the factors to include the goods in Sections 4-A(1) and (2) of the Act:
(i) The goods should be excisable goods;
(ii) They should be such as are sold in the package;
(iii) There should be requirement in the SWM Act or the Rules
made thereunder or any other law to declare the price of such goods relating to their retail price on the package;
(iv) The Central Government must have specified such goods by notification in the Official Gazette;
(v) The valuation of such goods would be as per the declared retail sale price on the packages less the amount of abatement.
If all these factors are applicable to any goods, then alone the valuation of the goods and the assessment of duty would be under Section 4-A of the Act.
“A bare perusal of Section 4(A) of the Act and the abovementioned judgment would show that to attract a MRP based valuation of goods 1 (2007) 8 SCC 34 under the Central Excise Act, the goods should be notified under Section 4(A) of the Act and that such goods must come within the purview of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, which has now been repealed and replaced by the legal Metrology (Packaged Commodities) Rules,2011”.
“In the present case at hand, the respondent entered into a sale with the paramilitary and military as per the terms of agreement signed. While the goods in the impugned sale were notified under Section 4(A) of the Act by way of an official notification in the gazette, what is most relevant to us is Rule 3(b) of the Legal Metrology (Packaged Commodities) Rules, 2011 which exempts the sale to institutional consumers from its purview”.
“The purchasers in this case are military and paramilitary institutions, both of whom purchase the goods in bulk from the respondent, and then further distribute it to their employees. In this entire process from the sale of the goods to the goods Actually being used by the end consumer, the purchaser military and paramilitary institutions become industrial consumers, as they serve as an intermediary between the end consumer and the original purchaser”.
“Due to the purchasers, on account of them being institutional consumers, are exempt from the Legal Metrology (Packaged Commodities) Rules, 2011, and since Section 4(A) of the Act mandates the applicability of the abovesaid rules, the transaction automatically becomes ineligible to claim refuge under Section 4(A) of the Act”.
“Further, even if we were to assume that Section 3(b) of the Legal Metrology (Packaged Commodities) Rules, 2011 is inapplicable to the present purchaser, the impugned sale still fails the test of point (iii) of the Jayanti Foods judgment.
“For the sale of goods to take refuge under Section 4(A) of the Act and pass the test of point (iii) in the Jayanti Judgment, there must be a requirement in the the Legal Metrology Act, 2009 or the rules made thereunder to declare the price of such goods relating to their retail price on the package. In simpler terms, it would mean that for a sale of goods to take assessment benefits under Section 4(A) of the Act, it must be a retail sale, and there must be a mandate of law that directs the seller to affix a retail price on the goods for a sale to be considered a retail sale”.
“It would also mean that a mere affixation of the MRP on a good does not qualify it to claim benefits under Section 4(A) of the Act, and that there must be a “requirement” for the affixation of such MRP. Therefore, even if there is affixation of MRP in the goods, what must be looked at it is whether such affixation was mandated by law”.
MATTER: COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, KANPUR …VS M/S. A.R. POLYMERS PVT. LTD. ETC. CIVIL APPEAL NOS. 9569-70 OF 2019