Denial of Credit of Excise duty paid on batteries which were supplied free of cost along with film roll.

PJ/ Case Law/2013-14/1617

Case:- M/s JINDAL PHOTO LTD Vs COMMISSIONER OF CENTRAL EXCISE, VAPI

Citation:- 2013-TIOL-907-CESTAT-AHM

Brief facts:- These two appeals are directed against Order-in-Appeal No.SA/130/VAPI/2011, dt.29.08.2011 and No.SA/131/VAPI/2011, dt.29.08.2011. The issue involved in this case is regarding denial of CENVAT Credit of Excise duty paid on batteries which were supplied free of cost along with film roll. The lower authorities have held that the appellant is not eligible for CENVAT Credit on the ground that the definition of input under Rule 2(d) of CENVAT Credit Rules, 2004 does not cover the item Battery as it is not used in or in relation to the manufacture of their final product.On perusal of the records, the first appellate authority has clearly recorded that the appellant herein is re-packing and re-labelling the final product cleared by them i.e. film rolls along with the battery inside the pack of film roll. This particular activity as per the Chapter Note to Tariff Heading No.3702 would amount to manufacture, is not disputed. If that be so, credit is admissible.

Reasoning of Judgement:- The judgment of Hon'ble High Court of Gujarat in the case of Prime Health Care Products - 2011 (272) ELT 54 (Gujarat), is referred in this case. Relevant para of this case is:

We have examined this reasoning of the Tribunal in view of the provisions contained in Cenvat Credit Rules, 2004. Rule 3(1) of the Rules says that a manufacturer or producer of final product or a provider of taxable service shall be allowed to take credit of items mentioned therein. The proviso further states that the cenvat credit shall be allowed to be taken of the amount equal to central excise duty paid on any input or capital goods received in the factory of manufacture of final product. The word "input" is defined in Rule 2(k) which also includes accessories of the final products cleared along with final product. There is no dispute about the fact that on toothbrush, excise duty has been paid. The toothbrush is put in the packet along with the tooth paste and no extra amount is recovered from the consumer on the toothbrush. Considering the definition given in the Rules of "input" and the provisions contained in Rule 3, we are of the view that the Tribunal is justified in taking the view that the credit is admissible in the case of the respondent-assessee.

The view taken by the Tribunal is further supported by the provisions contained in Section 2(f) of the Central Excise Act, 1944 which defines the word "manufacture". It includes any process in relation to the goods specified in the Third Schedule, which includes packing or re-packing of such goods in a unit container. In the Third Schedule, at Serial No. 38, under Heading - Sub-Heading of Tariff Item, Entry No. 3306, is in respect of tooth paste. Hence, the process of packing and re-packing the input, that is, toothbrush and tooth paste in a unit container would fall within the ambit of "manufacture" as defined under the Act and as such, the assessee would be entitled to claim cenvat credit on such input.

In the above view of the matter, we are of the view that no question of law, much less any substantial question of law arises out of the impugned order of the Tribunal. Hence, we dismiss this appeal."

Since the issue is now squarely covered by the judgment of the Hon'ble High Court, it is found that the impugned order is liable to be set aside. In view of the foregoing, the impugned order is set aside and the appeals are allowed.

Decision:- Appeal allowed.

Comment:- The gist of the above case is that as the packing and repacking amounts to the manufacturing activity and the battery is accessory to the final product, film roll, cenvat credit is rightly admissible on the same.

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PJ/ Case Law/2013-14/1617

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