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MRP Based valuation in Central Excise

Surender Gupta
Section 4A of Central Excise Act: Excise Duty Based on MRP with Government-Specified Rebates and Ignoring Sale Prices. Section 4A of the Central Excise Act, 1944, outlines a special procedure for valuing certain goods based on their Maximum Retail Price (MRP). The central government specifies the rebate rate, as per notification no. 02/2006 CE(NT). For instance, if a product has an MRP of Rs. 100 with a 40% rebate, the excise duty is calculated on Rs. 60. The excise duty includes a 16% basic duty and additional cesses. Actual sale prices, local taxes, and discounts are disregarded in this calculation, and other valuation rules are ignored. (AI Summary)

Section 4A of Central Excise Act, 1944 provides special procedure for valuation of certain goods on which MRP is maladroitly required to be printed.

Under the provision of Section 4A, central government prescribes the rate of rebate. See notification no. 02/2006 CE(NT) dated 1/3/2006.

The procedure of valuation of calculation of central excise duty may be understood with the following example:

MRP is affixed on product 'X' is Rs. 100/-. Rate of Rebate is 40% in terms of notification no. 2/2006. Rate of Excise Duty is 16% and Cess 3% (2% + 1%). Rate of Sales Tax (VAT) is 3%.  Whole sale price of the product is Rs. 65 with duties of excise and local taxes.

Now for the purpose of Excise duty the following steps should be taken:

1

MRP

Rs. 100

2

Less Rebate @ 40%

Rs. 40

3

Value on excise duty to be paid

Rs. 60

4

Amount of Excise Duty of Rs. 60

Rs. 9.888

 

a.   Basic Excise Duty @ 16% =  Rs. 9.6

b.  Education Cess @ 2% =       Rs. 0.192

c.  SH Education Cess @ 1% =   Rs. 0.096

 

5

For the purpose of calculation of excise duty - actual sale price to be ignored.

6

Local taxes like sales tax shall be ignored

7

Any discount whether quantity discount / volume discount or performance discount shall be ignored

8

All other adjustments prescribed under section 4 shall be ignored.

9.

Provisions of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 shall be ignored.

Central Excise
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