2021 (7) TMI 300 - AT - Central Excise

CENVAT Credit - inputs - plastic household buckets - kitchen containers - to be considered as inputs or not, as they were neither used in the factory for the manufacture of final products nor were they accessories to their final products? - inclusion of value of buckets and other plastic containers in the value of soap (final product) - HELD THAT - In clause (ii) of Rule 2(k) of CCR, the expression any goods is emphasized and this expression has a wide scope and coverage and there are no restriction that the goods covered under the expression need to be part of final product which are subjected to manufacture or they need to be accessories etc. The sole criteria for the goods coming under the said expression any goods should be the one that the value of these goods should be included in the value of the final product. Whether the value of buckets and other plastic containers were included in the value of the final products i.e. soap? - HELD THAT - It was clearly brought on record by the appellants that the expenses towards purchase of the buckets are charged against the sales value of the company and therefore under the financial accounting angle, the value of the buckets are buried into the business income alone. It is an admitted fact that the appellant have not collected any consideration separately for bucket and hence the cost of the buckets was not charged on the customers separately. In the case of M/S. CADBURY INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I 2017 (4) TMI 1215 - CESTAT MUMBAI , the Tribunal has reiterated the decision of M/S. MANIK MACHINERY MANUFACTURERS P. LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-IV 2016 (9) TMI 623 - CESTAT MUMBAI case, and has held that the assesse is entitled to cenvat credit on free goods given along with other goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of the appellant to avail CENVAT credit on household plastic buckets and plastic containers.
- Interpretation of the definition of "input" under Rule 2(k) of CCR 2004.
- Applicability of judicial precedents regarding the eligibility of goods as inputs for availing credit.

Issue 1: Eligibility of CENVAT credit on plastic buckets and containers:

The appellant, engaged in manufacturing and clearance of soaps, availed cenvat credit on plastic buckets and containers. The dispute arose as these items were not used in the factory for manufacturing final products, leading to a show-cause notice proposing denial of credit. The Commissioner(Appeals) upheld the denial, citing reasons like the items not being accessories to final products and not included in the sales value. The appellant argued that the items fell under the definition of "input" as per Rule 2(k) of CCR 2004. The Tribunal analyzed the definition, emphasizing the broad scope of the term "any goods" and the requirement that their value should be included in the final product. Referring to precedents like Manik Machinery Manufacturers Pvt. Ltd. and Cadbury India Ltd., the Tribunal concluded that the impugned order was unsustainable, allowing the appeal.

Issue 2: Interpretation of the "input" definition under Rule 2(k) of CCR 2004:

The Tribunal delved into the definition of "input" under Rule 2(k) of CCR 2004, emphasizing the inclusion of goods used in or in relation to manufacturing final products. It noted that the value of such goods should be part of the final product's value. The appellant successfully argued that the cost of plastic buckets and containers was absorbed in the sales value, making them eligible for credit. By referencing Tribunal decisions and the broad interpretation of "input," the Tribunal ruled in favor of the appellant, setting aside the impugned order.

Issue 3: Applicability of judicial precedents on eligibility of goods as inputs:

The appellant cited judicial precedents like Manik Machinery Manufacturers Pvt. Ltd. and Cadbury India Ltd. to support their claim for availing credit on plastic buckets and containers. These precedents highlighted that goods supplied along with final products for sales promotion could be considered inputs. The Tribunal, aligning with these decisions, emphasized that if the goods' value was included in the final product's value, credit should be allowed. By analyzing and applying these precedents, the Tribunal found the impugned order unsustainable and allowed the appellant's appeal.

This detailed analysis of the judgment thoroughly covers the issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision in favor of the appellant.