Relief for Bata India: CESTAT Rules MRP Valuation Not Applicable on Institutional Sales, Quashes Excise Duty Demand [Read Order]

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that valuation based on maximum retail price (MRP) under Section 4A of the Central Excise Act does not apply to institutional sales, and set aside the excise duty demand raised against Bata India Limited.

Bata India Limited, the appellant, is a manufacturer of footwear and had cleared its products during the period from January 2009 to December 2013 to various institutional buyers such as JSW Ltd., Exide Batteries Ltd., and HAL.

The company assessed excise duty on these clearances under Section 4A of the Central Excise Act based on the printed MRP. During the audit, the department took the view that these were not retail sales and that the correct valuation should have been done under Section 4, based on the transaction value.

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A show cause notice was issued, demanding differential duty of Rs. 3,19,701 along with interest and penalties, alleging that the appellant wrongly applied MRP-based valuation and suppressed facts with an intention to evade duty.

The adjudicating authority confirmed the duty demand and imposed a penalty of Rs. 5,000. On appeal, the Commissioner (Appeals) not only upheld the duty demand but also enhanced the penalty to Rs. 3,19,701 under Section 11AC of the Central Excise Act. Aggrieved by this decision, the appellant approached the CESTAT.

The appellant’s counsel argued that the sales were to institutional buyers and were made against specific purchase orders, which did not qualify as retail transactions. The company had clearly mentioned the actual transaction value in all invoices and maintained that the duty was paid correctly under Section 4 of the Central Excise Act.

The revenue counsel argued that the goods bore MRP, so the valuation under Section 4A was justified. They argued that affixing the MRP was a deliberate act to mislead and underpay the excise duty.

The two-member bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) explained that Section 4A applies only when goods are sold in retail and there is a legal requirement to declare the MRP. Since the buyers in this case were institutions and not retail consumers, the sales could not be valued under Section 4A of the Central Excise Act

The tribunal also found that the department had not shown any evidence that the MRP was recovered or that any excess amount was received beyond the transaction value. It stated that CBEC’s own circulars and established judicial rulings clarified that MRP-based valuation is not applicable when goods are sold to unrelated institutional buyers.

The bench further held that no suppression of facts or intent to evade duty was proved by the department. It allowed the appeal and set aside the orders passed by the lower authorities. The demand for differential duty, interest, and penalties was quashed. The tribunal granted the appellant full relief.

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