The Supreme Court(SC) has held that benefits under section 4A of the Central Excise Act, 1944 applicable only to retail sales.
Respondent No.1, M/s AR Polymers Pvt. Ltd. is a manufacturer engaged in the manufacture of footwear and the sale of the same to defence/paramilitary forces in bulk for their use. Intelligence was received by the DGCEI that the respondent was availing benefits under notification No. 12/2012-CE dated 17/03/12 and Section 4(A) of the Central Excise Act, 1944, which is limited to footwear sold in retail. The said notification wholly exempts the payment of Central Excise Duty for the retail sale of footwear under Rs. 500/- and limits Central Excise Duty to 6% where the rate of the footwear is between Rs. 501/- to Rs. 1000/-
It was found that the respondent was manufacturing the footwear as per a contract entered into between the parties, and a rate for the sale and purchase of the footwear was fixed under the contract. It was also found that the respondent was printing and attaching MRP stickers on the insole of the said shoes, only to avail the benefits of the abovementioned notification and Section 4(A) of the Act.
A demand-show cause notice was issued to the respondent requiring them to show cause to the commissioner of central Excise, Customs & Service tax. The Adjudicating authority passed an order against the respondent holding that the benefit of the aforesaid notification does not extend to the footwear sold by the respondent, and hence the respondent was directed to pay the difference amount between the tax already paid and the tax which was liable to be paid.
Section 4(A) of the Central Excise Act would show that to attract an MRP-based valuation of goods under the Central Excise Act, the goods should not be notified under Section 4(A) of the Act. The goods must come within the purview of the Standards of Weights and Measures (Packaged Commodities) Rules, 2011.
The Division Bench of Justice Krishna Murari and Justice Sudhanshu Dhulia has observed that the mere affixation of MRP does not make goods eligible to find refuge under Section 4(A) of the Act, and what is required along with such affixation is a mandate of law that directs the seller to affix such MRP.
The SC set aside the order of CESTAT and the Respondent being under an obligation is directed to pay the differential amount to the relevant tax authority.
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