2010 (2) TMI 443 - AT - Central Excise

Cenvat/Modvat - Tatoos/printed transfers - During the course of scrutiny of their ER-1 Return for the period from September 2001 to August 2002 it was revealed to the department that the respondents had been wrongly availed Cenvat credit on Boomer Tatoos (New Design)/Printed Transfers classifiable under Heading 3920.38/4901.10 of the Central Excise Tariff Act to the tune of Rs. 70, 90, 852/- which was not permissible as the same could not have been treated as specified input used in the manufacture of final product since same were being used along with final product as the complementary items for sale promotion of their main product and had nothing to do with the manufacture of main product. Consequently a show-cause notice dated 3-10-2002 was issued to the respondents. Held that - findings set aside in view of earlier decision in assessee s own case. No case for taking different view. Cenvat Credit recoverable along with interest and equal penalty.

Summary

Issues:
Challenge to order allowing Cenvat credit on complementary items - Classification of items used for sale promotion - Interpretation of Cenvat Credit Rules - Justification for disentitlement of credit - Precedents and Tribunal decisions - Confirmation of demand and penalty imposition.

Analysis:
1. Challenge to Cenvat Credit Order:
The appellant contested the order passed by the Commissioner, Chandigarh, allowing the respondents to avail Cenvat credit on "Boomer Tatoos/Printed Transfer" used as complementary items. The appellant argued that these items were not specified inputs for the manufacture of the final product but were used for sale promotion, thus challenging the eligibility of Cenvat credit on these items.

2. Classification and Usage of Items:
The respondents, engaged in manufacturing confectionery items, used 'Boomer Tatoos/Printed Transfer' as complementary items for sale promotion. The department contended that these items did not qualify as specified inputs for the final product's manufacture, leading to the issuance of a show-cause notice for recovery of the availed Cenvat credit amounting to Rs. 70,90,852/-.

3. Interpretation of Cenvat Credit Rules:
The Commissioner, in the impugned order, relied on the analysis that the Tatoos/Printed Transfer were supplied as complementary items and not used as packing material. The Commissioner's decision was based on the interpretation that these items did not fall under the definition of 'Input' as per the Cenvat Credit Rules for the final product manufactured by the respondents.

4. Precedents and Tribunal Decisions:
The appellant cited the decision in the respondents' earlier case and the Perfetti Van Melle India Pvt. Ltd. case to support the disentitlement of Cenvat credit on Tatoos/Printed Transfer. The Tribunal had previously settled the issue in these cases, emphasizing that these items were not eligible for Cenvat credit as they were supplied as complementary items.

5. Confirmation of Demand and Penalty Imposition:
Based on the settled precedents and the Commissioner's finding that the Tatoos/Printed Transfer were complementary items, the impugned order was set aside, confirming the demand for recovery of the availed Cenvat credit. The respondents were also liable for penalty equal to the availed amount, as per the provisions of Rule 13(2) and Section 11AC of the Central Excise Act, 1944.

In conclusion, the appeal was allowed, the cross-objection was rejected, and the amount of Rs. 70,90,852/- availed as Cenvat credit on the Tatoos/Printed Transfer was declared illegal and recoverable by the department. The respondents were also subjected to penalty in accordance with the law.