MRP-based valuation is not applicable to products sold in bulk to industries

Apr 03 2009, 01:39 IST
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SummaryHere are some queries on taxation and foreign trade regulations, addressed by Ernst & Young. Readers may mail their queries to

We are a paint manufacturing company and sell our products in the retail market. We are required to adopt MRP-based valuation as per Section 4A of the Central Excise Act for the payment of excise duty. However, many times we get purchase orders from industrial buyers who buy our products in bulk. We have come to know that duty computation on MRP is not applicable in case of industrial sale. Please advise.

MRP-based valuation is governed by Section 4A of the Central Excise Act, 1944. The primary requirement attracting MRP-based valuation of goods under excise is that the goods should be notified under Section 4A of the Act and should be covered within the purview of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977. These rules do not apply to packaged commodities that are meant for sale to industrial/institutional consumers, who purchase the commodities for using the products in their industry. Sale of bulk quantities of your product, not intended for sale in retail, to industrial buyers would be outside the purview of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 and, therefore, would not attract MRP-based valuation for the purpose of payment of excise duty.

We are a medium-sized enterprise engaged in import of apparels. During the course of import, we pay the applicable customs duty. Also, we wish to avail the benefit of SAD refund on trading of apparels. We are not directly engaged in trading of these imported goods and the sales are made by our consignment agents at various locations as per our directions. Accordingly, the sale invoices and VAT challans are in the name of consignment agent. Please advise whether we should be able to claim SAD refund in such a case.

This issue has been clarified by a circular issued by Central Board of Excise & Customs wherein the guidelines to be followed, when the sale of imported goods is not made by the importer himself but is made by the consignment agent as per the directions of the importer, have been prescribed. The circular provides that it is possible to obtain refund in such cases, provided the conditions prescribed therein are complied with. Some of the conditions prescribed include the requirement of an agreement between the importer and the consignment agent authorising the consignment agent to sell the imported goods and make payment of VAT thereon, on behalf of the importer. Further,

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