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2018 (12) TMI 548 - AT - Central ExciseCENVAT Credit - Common inputs and input services used in manufacture of taxable as well as exempt goods - separate accounts not maintained - Tawas being cleared without payment of duty amounted to trading activity which, being an exempted service, Credit reversal is sought - Held that - Merely because the Tawas are supplied by the job worker to the appellant and then cleared to the customer, the Department has taken the view that the clearance of Tawa is a pure trading activity. It has to be noted that inputs for manufacture of Tawa has been supplied by the appellant herein. So also the job work charges are paid as conversion charges to the job worker. These elements including the excise duty has gone into the assessable value of the pressure cooker which is cleared along with the free Tawa in the combo-package. This being so, the appellants have rightly availed the Credit on the inputs. The activity of supply of job worked goods to the principal manufacturer and thereafter, the clearance of the finished product, cannot be considered as a trading activity. Consequently, there is no requirement for the appellant to comply with the provision of maintaining of separate accounts as per Rule 6 of the CENVAT Credit Rules, 2004 - the Credit availed on the inputs used for the manufacture of Tawa is correct and proper. Appeal allowed - decided in favor of appellant.
Issues:
1. Whether the appellant is eligible to avail CENVAT Credit on common inputs and input services used for manufacturing a combo-package containing a pressure cooker and Tawa? 2. Whether the activity of supplying job worked goods to the principal manufacturer and subsequent clearance of the finished product constitutes a trading activity? 3. Whether the appellant is required to maintain separate accounts for availing CENVAT Credit under Rule 6 of the CENVAT Credit Rules, 2004? Analysis: Issue 1: The appellant availed CENVAT Credit on common inputs and input services used for manufacturing a combo-package containing a pressure cooker and Tawa. The Department alleged that clearing Tawas without duty payment was a trading activity, making the credit irregular. The Original Authority and Commissioner (Appeals) upheld the demand. The appellant argued that the Tawa was manufactured by a job worker, and the combo-package's MRP only indicated the pressure cooker's price, as the Tawa was free. The appellant correctly discharged excise duty on the combo-pack, and the demand was based on Tawa's duty-free clearance, not the pressure cooker. The appellant's credit availing was proper. Issue 2: The Department contended that the activity of supplying job worked goods and clearing the finished product was trading, requiring separate accounts. However, the Tribunal found that the appellant supplied raw materials for Tawa to the job worker, who paid duty, and the finished product's assessable value included these elements. Thus, the activity did not constitute trading, and maintaining separate accounts was unnecessary as per Rule 6 of the CENVAT Credit Rules, 2004. Issue 3: The Tribunal referenced a similar case where items supplied with the final product for sales promotion were considered inputs eligible for credit. Considering this precedent and the facts of the case, the Tribunal set aside the impugned order, allowing the appeal with consequential reliefs. The judgment emphasized the essence of the CENVAT scheme to avoid tax cascading and upheld the appellant's right to avail CENVAT Credit on inputs used in manufacturing the combo-package. In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal and providing necessary reliefs as per law.
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