2014 (12) TMI 1269 - AT - Central Excise

Waiver of pre-deposit - Cenvat credit - input services inputs or capital goods - Penalty - The undisputed facts are that the appellant manufacture panmasala in retail pouches of different MRPs in respect of which duty liability is being discharged under Section 3A of the Central Excise Act, 1944 read with PMPM Rules, 2008 - Held that - From a perusal of this Rule 15 of PMPM Rules, 2008, it is clear that it is a non obstante provision prohibiting taking of Cenvat credit of any Central Excise Duty paid on any input and capital goods or service tax paid on any input service used for manufacture of notified goods and also requiring that the duty on notified goods shall be paid in cash - The prohibition in Rule 15 of PMPM Rules is not in respect of input service as defined in Rule 2(l) of Cenvat Credit Rules, 2004, but is in respect of input services used for manufacture of the notified goods. Moreover, prima facie, there appears to be merit in the appellant s plea that such retail pouches and 100 gm tins of pan masala are used by different section of consumers and advertisement for 100 gm. tins cannot be treated as having promoted the sale of retail pan masala pouches - Stay application allowed - decided in favor of the assessee.

Summary

Issues: Dispute over Cenvat credit eligibility for advertisement and sales promotion services in relation to manufacturing panmasala in retail pouches and 100 gram tin packs under PMPM Rules, 2008.

Detailed Analysis:

1. Background and Dispute Overview:
The appellant company, manufacturing panmasala in retail pouches and 100 gram tin packs, faced a dispute regarding duty liability discharge and Cenvat credit eligibility. The disagreement arose from advertisement and sales promotion services received by the appellant, specifically for the panmasala sold in 100 gram tin packs.

2. Appellant's Arguments:
The appellant contended that the advertisement services were solely for sales promotion of the panmasala in 100 gram tin packs, distinct from the panmasala in retail pouches. They argued that the two products catered to different consumer segments, justifying separate treatment. Additionally, they highlighted Rule 15 of PMPM Rules, 2008, emphasizing that the prohibition on Cenvat credit pertained to inputs directly used for manufacturing notified goods, not for general business activities like advertisements.

3. Department's Stand:
The Department opposed the appellant's claim, asserting that both panmasala variants were essentially the same product. They argued that the advertisement services, even if focused on the 100 gram tin packs, inadvertently promoted sales of the panmasala in retail pouches. Referring to Rule 15 of PMPM Rules, 2008, the Department contended that Cenvat credit disqualification extended to services influencing overall sales, irrespective of packaging differences.

4. Tribunal's Decision:
After considering both sides' submissions and examining the facts, the Tribunal found merit in the appellant's arguments. They noted that the advertisement services were business-related and not directly linked to manufacturing the panmasala. The Tribunal interpreted Rule 15 of PMPM Rules, 2008, as restricting Cenvat credit solely for inputs used in manufacturing notified goods, not for general business expenses like advertisements. Moreover, they acknowledged the distinct consumer bases for the two product variants, supporting the appellant's case for separate treatment.

5. Outcome:
Consequently, the Tribunal ruled in favor of the appellant, granting a stay on the requirement for pre-deposit of Cenvat credit demand, interest, and penalty. They allowed the stay application, recognizing the appellant's prima facie case and the validity of their arguments regarding Cenvat credit eligibility for advertisement and sales promotion services related to panmasala in 100 gram tin packs.

In conclusion, the Tribunal's decision favored the appellant's position, emphasizing the nuanced distinctions between the two panmasala product variants and the permissible scope of Cenvat credit disqualification under Rule 15 of PMPM Rules, 2008.