Supreme Court Rules Goods Sold to Military and Paramilitary Institutions Ineligible for Tax Benefits under Section 4(A) of the Central Excise Act

June 16, 2023

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In a significant judgment, the Supreme Court of India ruled that goods sold to military and paramilitary institutions are ineligible for tax benefits under Section 4(A) of the Central Excise Act, 1944. The judgment was delivered by a bench comprising Justices Krishna Murari and Sudhanshu Dhulia. The case, titled Commissioner of Central Excise & Service Tax, Kanpur v. M/S. A.R. Polymers Pvt. Ltd., pertained to the interpretation of tax benefits claimed by the Respondent for the sale of footwear to defense and paramilitary forces.

The Court emphasized that for goods to qualify for tax benefits under Section 4(A) of the Act, they must meet certain criteria as outlined in the Jayanti Foods judgment. Justice Krishna Murari, delivering the judgment, stated, “The primary question before us today is whether the goods sold by the respondent are eligible to claim tax benefits within the purview of the abovementioned notification under Section 4(A) of the Central Excise Act?”

Upon analysis, the Court concluded that the sale of goods to military and paramilitary institutions did not qualify as retail sales under the Act. Furthermore, the Court highlighted that the Legal Metrology (Packaged Commodities) Rules, 2011 exempted sales to institutional consumers from its purview. Justice Murari added, “The transaction between the Respondent and the institutions cannot claim the benefit of Section 4(A) of the Act.”

The Court clarified that the mere affixation of Maximum Retail Price (MRP) on goods does not automatically make them eligible for tax benefits. It emphasized the requirement of a mandate of law for the affixation of MRP. As a result, the Court set aside the judgment of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) that had allowed the Respondent’s plea for tax benefits.

Date of Decision: 21st March 2023

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

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