2009 (1) TMI 465 - AT - Central Excise

Cenvat/Modvat - manufacture - Held that - repacking labeling etc. as in the present case, process of packing amounted to manufacture and therefore packing the two items together itself amount to manufacture and hence it has to be held that credit is admissible in the present case - appeal allowed.

Summary

Issues:
1. Admissibility of Cenvat credit on duty paid for toothbrush included in combi packs.
2. Upholding of penalties on the appellants.
3. Denial of Cenvat credit on duty paid for toothbrush.

Analysis:
The case involved the appellants engaged in manufacturing toothpaste who cleared combi packs containing toothpaste and toothbrush, as well as regular packs with no toothbrush. The appellants purchased toothbrushes and availed Cenvat credit on the duty paid for them. The retail price for both types of packages was the same.

The issue of admissibility of Cenvat credit on the duty paid for the toothbrush in the combi packs was raised after the demand for an extended period was set aside by the Commissioner (Appeals). The penalties on the appellants were upheld, and the Cenvat credit on the duty paid for the toothbrush was denied, leading to the appeals.

The advocate for the appellants argued that the combi pack containing the toothbrush reached the final stage of marketability only after the toothbrush was placed with the toothpaste. Citing various decisions, including CCE v. Gupta Soap, Lotte India Corporation Ltd., Naga Limited, Standard Surfactants Ltd., and Jagsonpal Pharmaceuticals, it was contended that the process of packing the two items together amounted to manufacture. Therefore, the credit should be admissible, as in similar cases where credit was allowed for duty paid on related products used in manufacturing combi packs.

Ultimately, the appeals were allowed, and consequential relief was granted to the appellants, with the decision pronounced on 22nd January 2009. The judgment emphasized that the process of packing the toothpaste and toothbrush together constituted manufacture, making the Cenvat credit admissible in this case.