2006 (4) TMI 452 - AT - Central Excise

Cenvat/Modvat - Boomer tattoo - Tattoos supplied with bubble gum - Words and Phrases - Appeal to Appellate Tribunal

Summary

Issues:
Denial of CENVAT Credit for Boomer tattoos used in the manufacture of bubble gum.

Analysis:
The appellants, engaged in bubble gum manufacturing, claimed CENVAT Credit for Boomer tattoos used as packing material. The Revenue denied credit, asserting tattoos were not essential for packing as some bubble gums were directly packed in printed foil without tattoos. The appellants argued tattoos enhanced shelf life and cited precedents supporting credit for similar items like refractory material and hanging cards with razor blades. The Revenue contended tattoos were promotional, not essential packing material. The Tribunal noted that while packing material is creditable, tattoos were not primary packing as only 40-60% of bubble gums were wrapped in them. The presence of "free tattoo inside" on packaging indicated tattoos were promotional. Comparisons to cases involving bags for cement and cellophane tapes were deemed inapplicable as the majority of bubble gums were sold without tattoos, indicating tattoos were not primary packing material. The Tribunal held tattoos were not packing material and denied credit.

This judgment highlights the importance of establishing the essential nature of items claimed for CENVAT Credit and how they relate to the manufacturing process. The decision emphasizes that mere inclusion of an item in packaging does not automatically qualify it as packing material for credit purposes. The ruling also underscores the significance of industry-specific practices in determining the eligibility of items for credit, as evidenced by the comparison to precedents involving different products. The case serves as a reminder for manufacturers to carefully assess the role and necessity of each component in their production process when seeking CENVAT Credit to avoid potential disallowances.