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Commissioner of Central Excise and S.T. Kanpur vs. M/s A. R. Polymers Pvt. Ltd. Etc. (Civil Appeal Nos. 9569-9570 of 2019)

Civil Appeal · 2023 INSC 268Decided 21 Mar 2023
Civil Appeal Nos. 9569-9570 of 2019
Krishna Murari · Sudhanshu Dhulia

Background

A footwear manufacturer sold shoes in bulk to defence and paramilitary forces under contracts with fixed prices, but printed MRP stickers on the shoes to claim a lower excise duty rate available under a notification for retail footwear sales (fully exempt below Rs. 500, 6% duty between Rs. 501-1000). Tax authorities found this improper since the sales were not genuine retail sales, and demanded the higher differential duty. The CESTAT (tribunal) ruled in the manufacturer's favour, holding the MRP-based notification applied since the goods were duly notified under Section 4(A) of the Central Excise Act. The government appealed to the Supreme Court; the respondent did not appear despite notice.

Decision Breakdown

The Supreme Court held that mere affixation of an MRP sticker does not automatically qualify goods for MRP-based (Section 4(A)) duty assessment. There must also be a legal requirement mandating that MRP be affixed for that specific sale, and a genuine "retail sale" to an actual final consumer. Since the buyers here (military and paramilitary institutions) were "institutional consumers" under Rule 3(b) of the Legal Metrology (Packaged Commodities) Rules, 2011, which exempts such consumers from mandatory MRP-labelling requirements, and they were merely intermediaries distributing footwear onward to their own personnel rather than final consumers themselves, the sale did not qualify as a retail sale. The Court held CESTAT had erred by considering only whether the goods were officially notified, ignoring the other conditions, and restored the demand for differential excise duty.

Lesson Learnt

Businesses cannot obtain a lower, MRP-based tax rate meant for genuine retail consumer sales simply by printing an MRP label on goods sold in bulk to institutional buyers under a negotiated contract price: the actual nature of the transaction and buyer, not just the label, determines the correct tax treatment.

Official source (sci.gov.in)View Judgment (PDF)

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