2021 (11) TMI 867 - AT - Central Excise

CENVAT Credit - input or not - aseptic trading material - case of the Revenue is that since the advertisement pertained to traded goods of which credit itself was not available, hence the appellants are required to reverse the credit of advertisement service attributed to traded packaging material - HELD THAT - The fact is not in dispute even as admitted in the show-cause notice that the advertisement service was in respect of trading of packaging material, however, for the purpose of calculating the reversal amount, the turnover of packaging machine was also taken into account. The advertisement papers presented clearly shows that the advertisement is in respect of packaging material and it nowhere indicates the trading of packaging machinery - Since advertisement service was not used for trading of packaging machines, the value of packaging machines for calculating the reversal amount of CENVAT Credit cannot be taken into account. The demand of CENVAT Credit in respect of input services i.e. advertisement services attributed to packaging machine is prima facie wrong. It is found that this issue has neither been raised by the appellants before the adjudicating authority nor has been considered by the adjudicating authority, hence the same needs to be reconsidered. Matter remanded to the adjudicating authority to reconsider the case - appeal allowed by way of remand.

Summary

Issues:
- Dispute over reversal of CENVAT Credit for advertisement services attributed to traded packaging material and packaging machinery.
- Validity of demand raised by Revenue for reversal of credit and imposition of penalty.
- Interpretation of advertisement services usage for trading of packaging machinery.

Analysis:
The case involved a dispute regarding the reversal of CENVAT Credit for advertisement services related to both traded packaging material and packaging machinery. The Revenue contended that since the advertisement pertained to traded goods for which credit was not available, the appellants were required to reverse the credit of advertisement services attributed to both traded packaging material and machinery. The Order-in-Original confirmed a demand of ?78,08,752/- under CENVAT Credit Rules, 2004 for both types of goods, along with penalties and interest. The appellants had already reversed a portion of the credit and paid interest. The main issue raised by the appellant was that the advertisement services were only for packaging material and not for machinery, hence the credit should not be attributed to machinery.

The appellant argued that they do not dispute the reversal of credit for advertisement services related to traded packaging material but contended that since the advertisement was only for packaging material, the credit should not be attributed to packaging machinery. The appellant provided evidence in the form of printed advertisements to support their claim that the advertisement was solely for packaging material and not machinery. On the other hand, the Revenue maintained that the appellants had themselves included the value of packaging machinery for reversal, indicating that the turnover of machinery should also be considered for calculating the reversal of credit.

Upon careful consideration, the Tribunal found that the advertisement services were indeed related to trading of packaging material, as admitted in the show-cause notice. However, the Tribunal observed that the advertisement clearly focused on packaging material and did not indicate any promotion of trading of packaging machinery. Therefore, the Tribunal concluded that the value of packaging machinery should not be included in calculating the reversal amount of CENVAT Credit, as the advertisement services were not utilized for trading machinery. The Tribunal held that the demand for CENVAT Credit related to advertisement services attributed to packaging machinery was prima facie incorrect. As a result, the impugned order was set aside, and the matter was remanded to the adjudicating authority for reconsideration based on the Tribunal's observations. The appeal was allowed for remand to the adjudicating authority for further review.