2018 (7) TMI 977 - AT - Central Excise

CENVAT Credit - toothbrushes procured between 13th March 2006 and 28th November 2006 for free supply along with toothpaste - Held that - It is admitted by Learned Counsel that the goods were cleared as toothpaste and not under any other description that would describe both the items as a set for acceptance of the price thereof as the correct assessable value; consequently, the definition of inputs in rule 2 (k) of CENVAT Credit Rules, 2004 cannot be extended to such toothbrush for availment of CENVAT credit - credit not allowed. Valuation - cosmetics manufactured and cleared as free samples - demand of duty - Held that - It is not in dispute that cosmetics are statutorily mandated for the printing of maximum retail price on the product with appendant liability to be assessed under section 4A of the Central Excise Act, 1944 - The appellant has not been able to bring on record any evidence that these were to be used by anyone other than the final customer. The manner of distribution of these free samples was also to be left to the entities in the marketing chain - the claim of the appellant that these were, not intended for sale to the ultimate consumer cannot be accepted, and they are required to comply with the printing of maximum retail price and to discharge duty liability under section 4A of Central Excise Act, 1944 - demand upheld. Valuation - double pack of toothpaste as sales promotion - demand of duty - Held that - It is not in dispute that the clearance of two tubes toothpaste in a single packet is intended to be made available customers in that manner. It is also not in dispute that the appellant discharged duty liability on the maximum retail price printed on such sets of toothpaste - Whether the tooth paste is sold as a single piece, or intended for sale is as a pair, is best left as a business decision of the manufacturer and, to the extent that the price has been declared on the package containing the combined set, the assessable value cannot be enhanced without any evidence of additional consideration flowing back. There is no evidence on record that duty has been discharged on value less than the retail price declared for the combination - demand set aside. The penalty under section 11 AC of Central Excise Act, 1944 reduced to ₹ 1,21,378/- - other penalties set aside. Appeal allowed in part.

Summary

Issues involved:
1. Availment of CENVAT credit on toothbrushes procured for free supply along with toothpaste.
2. Valuation of cosmetics cleared as free samples.
3. Valuation of double pack of toothpaste for sales promotion.

Detailed Analysis:
1. The appellant, a manufacturer of cosmetics and toothpastes, appealed against the demand of duties, interest, and penalties imposed by the Commissioner of Central Excise. The issues included the availment of CENVAT credit on toothbrushes procured for free supply with toothpaste. The appellant argued that the toothbrushes were used as inputs for clearance with toothpaste, citing relevant legal precedents to support their claim. However, the Authorized Representative contended that toothbrushes cleared along with toothpaste cannot be considered inputs for CENVAT credit as they were not described as a set for pricing, thus not meeting the criteria under CENVAT Credit Rules, 2004.

2. Regarding the valuation of cosmetics cleared as free samples, the appellant claimed that these products were not intended for retail sale and should be assessed under section 4 of the Central Excise Act, 1944, rather than section 4A. The Tribunal noted that the appellant failed to provide evidence that the cosmetics were solely for free distribution and not for sale to end consumers. As the products were not distinctly marked or intended solely as samples, they were deemed liable for duty assessment under section 4A.

3. The dispute over the valuation of a double pack of toothpaste for sales promotion centered on the duty liability for bundled clearance of two toothpaste tubes in one packet. The appellant argued that the duty paid on one tube should cover the entire packet, while the Revenue presumed that duty was only discharged for one tube. The Tribunal held that the duty liability should correspond to the declared maximum retail price on the combined set, without doubling the assessment unless there was evidence of additional consideration. The Tribunal set aside the demand related to the clearance of the second toothpaste as a set, reducing the penalty imposed under section 11 AC of the Central Excise Act, 1944.

In conclusion, the Tribunal upheld the demand for ineligible CENVAT credit and duty on cosmetics cleared as free samples, while setting aside the demand for the second toothpaste in a double pack. The penalty was reduced, and the appeal was allowed in part.