2007 (1) TMI 171 - AT - Central Excise

Whether the credit of Cenvat is allowable on the toothbrush cleared free along with toothpaste manufactured and cleared by the appellants It is settled proposition of the law that the credit can only be availed on the bough out item, when value of such bought out item is included to the value of the main product - held that toothbrush cannot be considered as input for toothpaste. Therefore, the question of allowing Cenvat credit on duty paid on toothbrush treating them as input does not arise

Summary

Issues:
Allowability of Cenvat credit on toothbrush cleared free with toothpaste.

Analysis:
The appeal questioned the allowance of Cenvat credit on a toothbrush provided free with toothpaste manufactured and cleared by the appellant. The Commissioner (Appeals) upheld the decision of the Deputy Commissioner, emphasizing that the credit of modvat can only be availed on the bought-out item when its value is included in the main product. The appellant's inclusion of the toothbrush value in the toothpaste price was scrutinized, especially in comparison to other toothpaste brands they manufactured. The Commissioner found the appellant's explanation lacking, as the certificate provided was deemed cryptic and vague, lacking evidentiary value. Consequently, the lower authority denied the Modvat credit on the toothbrush, considering it not an input under Central Excise Law.

The appellant cited several judgments and a Circular by the Central Board of Excise & Customs to support their case. However, the Tribunal noted that the toothbrush, though supplied free with toothpaste, could not be considered an input for toothpaste manufacturing. The appellant could export the toothpaste duty-free or on payment and claim rebate, but the toothbrush itself did not qualify as an input. The Tribunal found no compelling reasons to overturn the Commissioner (Appeals)'s decision, leading to the rejection of the appeal.

In conclusion, the Tribunal ruled against the appellant, emphasizing that the toothbrush, though provided alongside toothpaste, did not qualify as an input for claiming Cenvat credit. The judgment highlighted the distinction between the products and reiterated that the toothbrush could not be considered in the same category as inputs for toothpaste manufacturing. The decision was based on established legal principles and the specific circumstances of the case, ultimately denying the appeal and upholding the previous rulings.