2008 (1) TMI 125 - AT - Central Excise

Final products manufactured by appellant are packed in primary cartons & thereafter they were cleared with master packing cartons to depots prior to 13.5.03, depot wasn t place of removal so master cartoons can t said to be used in relation to mfg. of final product, hence credit of duty paid on master cartons is denied for period prior to 13.5.03 - Once cost of such additional packing at depot has been considered to be inclusive in AV, credit on master cartons shall be available after 13-5-03

Summary

Issues:
1. Denial of Cenvat credit on packaging materials used at depots and C & F agents.
2. Interpretation of 'inputs' under Rule 57AA in relation to manufacture of final products.
3. Applicability of Section 4 of the Central Excise Act regarding place of removal.
4. Limitation period for availing Cenvat credit.

Analysis:

Issue 1: Denial of Cenvat credit on packaging materials
The appellants were engaged in manufacturing pressure cookers and cleared packaging materials separately to depots and C & F agents. The authorities denied Cenvat credit on the grounds that these materials were not used within the factory of production. The appellant argued that since all goods were sold from depots/C & F agents, the packaging materials should be considered used in or in relation to the manufacture of final products. The appellant relied on the Apex Court's decision in Vikram Cement case to support their claim that the definition of 'inputs' does not restrict usage to within the factory premises. The Tribunal held that prior to 13-5-2003, when goods were packed in primary cartons and transported as such, the master cartons used at depots cannot be considered used in relation to manufacturing. However, post-13-5-2003, when depots were defined as a place of removal and goods were first sold from there, the credit on master cartons was deemed admissible.

Issue 2: Interpretation of 'inputs' under Rule 57AA
The appellant argued that the Commissioner (Appeals) wrongly denied credit based on the location of usage of inputs. They contended that the definition of 'inputs' under Rule 57AA does not mandate usage within the factory of production. The Tribunal concurred, emphasizing that the critical factor is whether the inputs were used in or in relation to the manufacture of final products. The Tribunal referred to the Vikram Cement case to support its stance that the credit cannot be denied solely based on the location of usage.

Issue 3: Applicability of Section 4 of the Central Excise Act
The appellant cited an amendment to Section 4 of the Central Excise Act effective from 13-5-2003, extending the place of removal to depots and C & F agents. They argued that packing charges incurred at depots post this amendment should be considered in relation to the manufacture of goods. The Tribunal referenced a previous decision to support the inclusion of packing charges at depots in the assessable value of goods post the specified date, thereby allowing credit on such packing materials.

Issue 4: Limitation period for availing Cenvat credit
The appellant raised a limitation plea, asserting that the demand in the show cause notice beyond one year was time-barred. They contended that the credit on master cartons was not suppressed and was reflected in the register. The Tribunal acknowledged the limitation plea and remanded the matter to the original authority for further examination to determine if there was an intention to evade duty, emphasizing the need for findings on this aspect.

In conclusion, the Tribunal partially allowed the appeal by remanding the case for a detailed examination of the limitation plea, while providing clarity on the admissibility of Cenvat credit on packaging materials used at depots and C & F agents post the specified amendment date.