2012 (5) TMI 249 - AT - Central Excise

Free gifts - Cenvat Credit - inclusion in value of excisable goods - Supply of playings cards as free gift - a market gimmick - manufacturers of spray gun and spares - held that - by no stretch of imagination, playing cards can be construed as an input for the manufacture of spray guns; playing cards cannot be construed as input service as they are goods. Thus it is seen that the playing cards are neither inputs nor input service for the purpose of CENVAT Credit Rules, 2004. - assessee directed to make pre deposit.

Summary

Issues:
- Admissibility of CENVAT credit on playing cards supplied as free gifts along with spray guns.

Analysis:
The appeal and stay applications were filed against an order passed by the Commissioner of Central Excise (Appeals) regarding the admissibility of CENVAT credit on playing cards supplied as free gifts along with spray guns by M/s Manik Machinery. The appellant claimed that the cost of playing cards was included in the assessable value of the spray guns, even though they were provided as gifts. The department contended that playing cards did not qualify as 'inputs' or 'input services' under the CENVAT Credit Rules, 2004. A notice was issued demanding repayment of wrongly availed CENVAT credit, along with interest and a penalty. The Commissioner (Appeals) upheld the decision, leading to the appeal before the tribunal.

The appellant argued that although playing cards were not necessary for manufacturing spray guns, they were provided as an incentive to buyers and were included in the assessable value of the spray guns. They claimed that CENVAT credit should be allowed even if the input was indirectly used. On the other hand, the revenue representative contended that playing cards did not meet the definition of 'input' under the CENVAT Credit Rules, as they were not required for manufacturing spray guns and could not be considered as accessories to the final product. The tribunal analyzed the definition of 'input' under the CENVAT Credit Rules, which clearly stated that goods used in or in relation to the manufacture of final products, directly or indirectly, could qualify for CENVAT credit. However, playing cards did not fall under this definition and could not be considered as 'input services' since they were goods, not services.

After considering the submissions, the tribunal concluded that playing cards supplied as free gifts were neither inputs nor input services under the CENVAT Credit Rules, 2004. Therefore, the appellant was not entitled to CENVAT credit on the excise duty paid for the playing cards. The tribunal directed the appellant to make a pre-deposit of the disputed amount within a specified period and waived the balance of the dues, including interest and penalty, pending the appeal process.