The Supreme Court has held that mere affixation of MRP does not make the goods eligible to claim benefit under Section 4(A) of the Central Excise Act, 1944, and what is required is a mandate of law that directed the seller to affix MRP along with the affirmation.

The Bench of Justice Krishna Murari and Justice Sudhanshu Dhulia observed that “In such a circumstance, where the purchaser institution is deemed to not be a consumer, the sale also cannot be held to be a retail sale as per the Act. Further, since the impugned sale is not a retail sale as per the Act, there exists no mandate of law on the Respondent herein to affix an MRP on the goods sold, and hence the said impugned transaction cannot claim benefit under Section 4(A) of the Act.”

Advocate Mukesh Kumar Maroria appeared for the appellant.

In this case, the respondent, a manufacturer of footwear entered into a sale with the parliamentary and military forces in bulk and who then further distributed footwear to their employees. The respondent was availing benefits under a notification and Section 4(A) of the Act which was limited to the footwear sold in retail.

The rate for the sale and purchase of the footwear was fixed under the Contract but it was found that the respondent was printing and attaching MRP stickers on the insole of the said shoes, only to avail the benefits of the notification and Section 4(A) of the Act.

The Adjudicating Authority passed an order against the respondent, and he was directed to pay the difference amount between the tax already paid and the tax which was liable to be paid. The Respondent filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) which held that the benefit of the notification extended to the respondent. Against this order, the appellant approached the Apex Court.

The Apex Court referred to the decision of Supreme Court in the case of Jayanti Food Processing Pvt. Ltd. v. Commissioner of Central Excise, Rajasthan (2007) 8 SCC 34 and observed that "to attract a MRP based valuation of goods under the Act, the goods should have been 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within the purview of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 , which has now been repealed and replaced by the legal Metrology (Packaged Commodities) Rules,2011 (Rules, 2011)."

The Apex Court noted that as per Rule 3(b) of the Rules, 2011, the sale to institutional consumers was exempted from its purview and the entire process from the sale of the goods to the goods being used by the end consumer, the purchaser military and paramilitary institutions became industrial consumers, as they served as an intermediary between the end consumer and the original purchaser.

Therefore, the transaction automatically became ineligible to claim refuge under Section 4(A) of the Act, the Apex Court observed.

Accordingly, the appeal was allowed and the order of CESTAT was set aside.

Cause Title- Commissioner of Central Excise & Service Tax, Kanpur v. M/s. A.R. Polymers Pvt. Ltd. Etc.

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