2008 (7) TMI 313 - AT - Central Excise

Admissibility of cenvat credit on tattoos placed inside Chocolate packs such tattoos have been placed inside the pack of chewing toffee as a sale promotion scheme since they have not been used in mfg. of Chocolate they cannot be considered as inputs and hence credit is not admissible however credit was not availed with any mala fide intention so penalty is not imposable - no justification for invoking the extended period of limitation

Summary

Issues:
1. Eligibility of 'Tattoos' for Modvat credit.
2. Applicability of the period of limitation for demand of duty.
3. Imposition of penalty on the appellants.

Eligibility of 'Tattoos' for Modvat credit:
The appellants, engaged in manufacturing chewing gum, toffee, etc., faced a dispute regarding the credit of duty availed for 'Tattoos' placed inside their products for sales promotion. A show cause notice was issued, demanding duty payment of Rs. 1,81,88,429 for a specific period. The Commissioner confirmed the duty, interest, and penalty. The Tribunal, considering a previous judgment on a similar issue, held that 'Tattoos' were not eligible inputs for credit, ruling against the appellants on merits.

Applicability of the period of limitation for demand of duty:
Regarding the limitation period, the show cause notice was issued on 30th July 2003 for a period from October 2001 to March 2003. The Commissioner noted that the appellants initially misdescribed the 'Tattoos' in their records but later disclosed the relevant facts. The Commissioner considered the date of disclosure in a letter dated 14-8-2002 as the starting point for limitation. However, the Tribunal found that the credit availed for 'Tattoos' was reflected in the statutory records maintained by the appellants, and there was no mala fide intention or suppression. Therefore, the Tribunal remanded the matter to the Commissioner to quantify the demand within the one-year limitation period from the issuance of the show cause notice.

Imposition of penalty on the appellants:
As the issue revolved around the legal interpretation of Modvat provisions and no suppression or mala fide intent was found on the part of the appellants, the Tribunal deemed the penalty unjustified. Consequently, the Tribunal set aside the penalty imposed on the appellants, emphasizing that the demand should be restricted to the one-year limitation period from the date of the show cause notice. The appeal was disposed of accordingly, with no penalty imposed on the appellants.

This detailed analysis covers the eligibility of 'Tattoos' for Modvat credit, the application of the limitation period for duty demand, and the imposition of penalties on the appellants as addressed in the judgment by the Appellate Tribunal CESTAT NEW DELHI.