We have started getting purchase orders from industrial buyers who buy in bulk. We have come to know that duty computation on MRP is not applicable in the case of industrial sale. Please advise.
Section 4 of Central Excise Act, 1944 (CEA) provides the basis for determining the assessable value for calculating excise duty. However, Section 4A of the CEA provides an exception to the general rule. As per Section 4(A), specified goods which have been listed in the third schedule of the ETA merit valuation under MRP.
Valuation under MRP is covered by Section 4A of the CEA, wherein the principal requirement is that the goods should be notified under Section 4A and there must be a statutory requirement to declare the retail price of such goods on the package i.e should be covered within the purview of the Legal Metrology Act, 2009 and the Legal Metrology (Packaged Commodities) Rules, 2011.
As per the PC Rules, the rules do not apply to packaged commodities that are meant for sale to industrial/institutional consumers. Institutional consumer has been defined to mean the institutional consumer like transportation, airways, railways, hotels, hospitals or any other service institutions which buys packaged commodities directly from the manufacturer for use by that institution. Industrial consumer has been defined to mean the industrial consumers who buy packaged commodities directly from the manufacturer for use by that industry.
The sale of bulk quantities of your product, not intended for sale in retail but for industrial buyers, should be outside the purview of the LM Act & Packaged Commodities Rules and therefore, would not attract MRP-based valuation. The goods manufactured and meant for industrial use needs to be cleared from the factory by you on payment of excise duty on the transaction value without abatement.
VAT not paid by vendor
We are a Delhi-based company manufacturing plastic toys. We locally procure certain goods like screws and wires from one of our vendors located in New Delhi upon payment of appropriate VAT against the tax invoice raised by the local vendors. We have been utilising the VAT paid on inputs to offset our VAT output