2004 (9) TMI 465 - AT - Central Excise

Tribunal denies Cenvat credit for blades, but overturns penalty for claiming relief.

GM ENTERPRISES Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR

GM ENTERPRISES Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR - 2004 (177) E.L.T. 955 (Tri. - Del.) Issues:Claim for Cenvat credit on duty paid for free supply blades packed along with razors.Analysis:The appellant, a job worker for a company, received parts and assembled razors subject to excise duty. The dispute arose when the appellant claimed Cenvat credit for duty paid on free supply blades packed with razors. The Central Excise authorities denied the credit, stating that the blades were not inputs in the manufacturing process of razors. The lower authorities followed a previous Tribunal order concerning a similar case involving a different job worker of the same company. The Commissioner noted that the Tribunal's decision had been upheld by the Apex Court.The appellant argued that the previous Tribunal order was inapplicable as it pertained to Modvat credit, while the present case involved Cenvat Credit. They highlighted the difference in the definition of 'input' under the Cenvat Credit Rules, which specifically includes accessories of final products. The appellant also pointed out that the free supply blades in their case were compatible with the razors being assessed, unlike the situation in the previous case.Upon reviewing the records and examining samples of the razor packings, the Tribunal noted that the razors were marketed with specific names and packed along with free supply blades. The Tribunal observed that the free supply blades were clearly labeled as complimentary items, indicating that the razors were the primary products for sale. Despite the compatibility of the blades with the razors, the Tribunal reiterated that the free supply items did not qualify as inputs in the manufacturing process. The Tribunal emphasized that the issue at hand was the classification of free supply items in assessing manufactured goods for duty, rather than their necessity in the production process.Based on the above analysis, the Tribunal upheld its earlier decision from a similar case and denied the appellant's claim for Cenvat credit on duty paid for the free supply blades. However, the Tribunal ruled in favor of the appellant regarding the penalty imposed, stating that claiming CENVAT relief did not constitute an offense. Therefore, the penalty was set aside, and the appeals succeeded in that regard.