COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, KANPUR versus M/S. A. R. POLYMERS PVT. LTD. ETC.

Citation: [2023] 2 S.C.R. 1147 · Decided: 21-03-2023 · Supreme Court of India · Bench: KRISHNA MURARI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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COMMISSIONER OF CENTRAL EXCISE & SERVICE
TAX, KANPUR
v.
M/S. A. R. POLYMERS PVT. LTD. ETC.
(Civil Appeal Nos. 9569-70 of 2019)
MARCH 21, 2023
[KRISHNA MURARI AND SUDHANSHU DHULIA, JJ.]
Central Excise Act, 1944 – s.4(A) – Interpretation of – Goods
sold by the respondent if eligible to claim tax benefits within the
purview of the notification u/s.4(A) – Held: While the goods in the
impugned sale were notified u/s.4(A) by way of an official notification
in the gazette, r.3(b) of the 2011 Rules exempts the sale to
institutional consumers from its purview – In the present case, the
purchasers are military and paramilitary institutions, who purchase
the goods in bulk from the respondent, and then further distribute it
to their employees – Thus, the purchaser military and paramilitary
institutions become industrial consumers, as they serve as an
intermediary between the end consumer and the original purchaser
– The purchasers being institutional consumers are exempt from the
2011 Rules, and since s.4(A) mandates the applicability of the said
rules, the transaction automatically becomes ineligible to claim
refuge u/s.4(A) – Further, a consumer, as clarified by the Jayanti
Foods case, is the final consumer of the product, and not the
intermediary – 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 – Since the impugned sale is not a retail sale as per the Act,
there exists no mandate of law on the respondent to affix an MRP
on the goods sold, and hence the said impugned transaction cannot
claim benefit u/s.4(A) – CESTAT committed error in law by passing
the impugned order – Legal Metrology (Packaged Commodities)
Rules, 2011 – r.3(b) – Legal Metrology Act, 2009.
Allowing the appeals, the Court
HELD: 1.1 A bare perusal of Section 4(A) of the Act and
the Jayanti Food Processing judgment would show that to attract
a MRP based valuation of goods under the Central Excise Act,
the goods should be notified under Section 4(A) of the Act and
[2023] 2 S.C.R. 1147
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SUPREME COURT REPORTS
[2023] 2 S.C.R.
that such goods must come within the purview of the Standards
of Weights and Measures (Packaged Commodities) Rules, 1977,
now 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
is Rule 3(b) of the Legal Metrology (Packaged Commodities)
Rules, 2011 which exempts the sale to institutional consumers
from its purview. [Paras 7, 8][1152-C-F]
Jayanti Food Processing Pvt. Ltd. v. Commissioner of
Central Excise, Rajasthan (2007) 8 SCC 34 : [2007]
9 SCR 221 – relied on.
1.2 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. [Paras 9, 10][1152-F-H]
1.3 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. A mere affixation of the MRP on a good does not qualify it to
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claim benefits under Section 4(A) of the Act, and that there must
be a “requirement” for the af

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