2018 (7) TMI 1771 - AT - Central Excise

CENVAT Credit - inputs - supply of bought items such as soap and Herbal oil with manufactured items - manufacture of Keo Karpin oil - scope of SCN - Held that - In the case of M/s G.S. Enterprises Vs Commissioner of Central Excise Jaipur 2002 (3) TMI 116 - CEGAT, COURT NO. I, NEW DELHI , It was held that a tuck of 7 O clock blade purchased from the market and supplied along with the razor under one MRP cannot be considered to be Cenvatable input - credit not allowed. Scope of SCN - the plea of assessee is that in the SCN, the herbal oil is not specifically mentioned - Held that - Though the herbal oil does not stand specifically mentioned in the show cause notice but the manufacturers name having been specifically mentioned as also the fact that the total credit availed by the assesses including the credit availed in respect of herbal oil having been proposed to be denied - there is no merit in the assessee s plea. Penalty - Held that - There was no malafide intent to warrant penalty - penalty set aside. Appeal allowed in part.

Summary

Issues:
1. Admissibility of Cenvat credit on purchased products used in manufacturing final product.
2. Interpretation of show cause notice and proposal for denial of Cenvat credit on specific products.
3. Imposition of penalty for availing Cenvat credit.

Analysis:

*Issue 1: Admissibility of Cenvat credit on purchased products used in manufacturing final product*

The appellant, a manufacturer of Perfumed Hair Oil, purchased Cinthol soap and Herbal oil from other manufacturers, including these products in a single package under one MRP. The Revenue contended that neither the soap nor herbal oil could be considered inputs for manufacturing the final product, Keo Karpin oil, thus challenging the admissibility of Cenvat credit availed by the appellant. The Original Adjudicating Authority dropped the demand related to Cinthol Soap due to limitation but confirmed the demand concerning herbal oil, imposing a penalty. The Tribunal referred to precedents where similar situations were considered non-Cenvatable inputs, leading to a decision that herbal oil supplied with the appellant's manufactured oil cannot be deemed an input for Cenvat credit purposes.

*Issue 2: Interpretation of show cause notice and proposal for denial of Cenvat credit on specific products*

The appellant argued that the show cause notice did not propose to deny Cenvat credit for herbal oil, only for Cinthol soap. However, the Tribunal found that the notice intended to deny credit for products manufactured by others, including herbal oil procured from a specific manufacturer. The Tribunal noted that the appellant was aware of the proposal to deny credit for herbal oil based on their response to the notice. Therefore, the contention that there was no proposal to deny credit for herbal oil was dismissed, and the denial of credit for herbal oil was upheld.

*Issue 3: Imposition of penalty for availing Cenvat credit*

Regarding the penalty imposed, the Tribunal considered the issue a bona fide legal interpretation matter. Given that the appellant had informed the Jurisdictional Range Superintendent about availing the credit, and there was no evidence of malafide intent, the penalty was set aside while confirming the demand for repayment of the credit.

In conclusion, the Tribunal upheld the denial of Cenvat credit for herbal oil, dismissed the appellant's argument regarding the show cause notice, and set aside the penalty imposed, disposing of the appeal accordingly.