2013 (12) TMI 26 - AT - Central Excise

Bar of Limitation - Denial of Cenvat credit - Whether the appellant is entitled to avail credit of duty paid on the free supplied blades packed along with the razors manufactured by them by treating the same as inputs Held that - The show cause notice was issued on 10.12.2003 for the period October 2001 to July 2002 - the entire period is beyond the normal period of limitation - The appellant have taken a categorical stand that the entire facts were in the knowledge of the Revenue inasmuch as number of quarries were raised by them which stand replied to by the appellant. There being divergent views and the issue being a complex and technical in nature the appellant cannot be held guilty of suppression or malafide with an intent to evade duty - The lower authority have not referred to or relied upon any evidence indicating any positive suppression or misstatement on the part of the appellant - there is correspondence on the above subject thus indicating knowledge on the parts the Revenue in which case the longer period of limitation cannot be invoked order set aside Decided in favouro of assessee.

Summary

Issues:
1. Entitlement to Cenvat credit on duty paid for free supplied blades packed with razors.
2. Applicability of limitation period in the case.

Entitlement to Cenvat Credit:
The appellant was engaged in assembling and packing shaving razors and blades under the Gillette brand name for M/s Gillette India Ltd. The dispute arose regarding a composite pack containing a razor with five blades. The appellant received parts of razors and packs of blades from Gillette India, manufactured razors, blistered them with blades, and printed MRP on the composite packs. The issue was whether the appellant could avail Cenvat credit on duty paid for the free supplied blades. Previous decisions had ruled against the appellant, citing that the blades were supplied "free" under an incentive scheme, hence not eligible for credit. However, the appellant cited a decision where a similar situation involving toothbrushes was ruled in favor of the assessee. The Tribunal noted conflicting decisions and ruled in favor of the appellant, considering the lack of clarity in the law on the matter.

Applicability of Limitation Period:
The show cause notice was issued beyond the normal limitation period for the period in question. The appellant argued that the Revenue was aware of the facts as evidenced by correspondence between the parties. The Tribunal observed that the issue was complex and technical with divergent views in different court decisions. Given the lack of clarity in the law and the correspondence indicating the Revenue's knowledge, the Tribunal held that the longer limitation period could not be invoked. Consequently, the impugned order was set aside, and the appeal was allowed on the grounds of being time-barred.

This judgment highlights the complexities surrounding the entitlement to Cenvat credit on free supplied items and the importance of considering the limitation period in cases where the law is unclear and conflicting decisions exist. The Tribunal's decision focused on the lack of evidence of suppression or intent to evade duty by the appellant, ultimately leading to the appeal being allowed based on the limitation issue.