2010 (2) TMI 470 - HC - Central Excise

Cenvat - Inputs - Credit admissibility on tattoos - appellant contending that credit admissible on boomer tattoos as packing material. Chewing gum/bubble gum manufactured by appellant primarily packed in printed aluminum foils without tattoos. Tattoos placed in packaging material with indication free tattoo inside . Tattoos used as promotional material and cannot be termed as packaging material. Held that - primary function of tattoo is not packing but to promote trade and to attract children. Impugned orders holding tattoos not used in or in relation to manufacture. Tattoos cannot be considered as inputs and credit thereon not admissible.

Summary

Issues:
1. Whether the appellant-assessee is entitled to avail Cenvat credit on "Boomer-tattoos" used in the manufacture of chewing gum/bubble gum.

Analysis:
The appellant-assessee, engaged in the manufacture of chewing gum/bubble gum, availed Cenvat credit on inputs used in the manufacturing process, including packing material. However, a show cause notice was issued by the revenue, denying credit on "Boomer-tattoos" as they were considered not directly related to the final product. The Adjudicating Authority disallowed the credit, which was upheld by the Commissioner (Appeals) and the Appellate Tribunal.

The main argument put forth by the assessee was that as "Boomer-tattoos" were used in the packing material for bubble gum, they should be eligible for Cenvat credit. However, the High Court found this argument to be without merit. It was established that the primary function of including the "Tattoo" in the wrapped bubble gum was for promotional purposes and to attract customers, rather than as a part of the actual packing material.

The Court emphasized that the "Boomer-tattoo" did not serve as primary packing material, as the bubble gums were primarily packed into printed aluminum foils without the tattoos. The "Tattoo" was considered an additional promotional step and not a necessary component of the packing material. The Commissioner (Appeals) and the Appellate Tribunal also confirmed that the "Tattoo" had a separate identity and was primarily used for product promotion and advertisement.

Consequently, the High Court concluded that the "Boomer-tattoo" did not qualify as primary packing material directly or indirectly related to the manufacture of the final products. As it was deemed an element of trade promotion and advertisement, rather than a necessary packing material, the assessee was not entitled to Cenvat credit on the "Boomer-tattoo." The Court found no other legal infirmity in the impugned order and thus dismissed the appeal.

In summary, the High Court held that the appellant-assessee was not entitled to avail Cenvat credit on "Boomer-tattoos" as they were not considered primary packing material in relation to the manufacture of chewing gum/bubble gum. The Court emphasized the promotional nature of the tattoos and their distinct identity separate from the actual packing material, leading to the denial of the Cenvat credit claim.