Cenvat credit on blades in combo packs is admissible; free-supply labelling does not defeat credit eligibility.

Duty-paid blades packed with razors in a composite combo pack were treated as part of the final marketable product, so Cenvat credit remained admissible on the blades. The fact that the blades were described as supplied free was considered only a marketing feature and not a legal bar to credit. Applying the reasoning followed in a similar combo-pack context, the denial of credit was unsustainable and the consequential penalties also could not survive.

---

---

Issues: Whether Cenvat credit was admissible on duty-paid blades packed with razors in a combo pack, and whether the penalties based on denial of such credit were sustainable.

Analysis: The duty-paid blades were packed along with razors as a composite marketable pack and were intended for use by the consumer with the razor. The reasoning adopted from the Gujarat High Court decision on similar combo-pack goods was applied, namely that the packed-together goods constituted a final marketable product and that accessories or inputs forming part of such a pack remained eligible for credit when duty had been paid on them. The declaration that the blades were supplied free was treated as a marketing feature and not as a legal bar to credit. Since the denial of credit was found unsustainable, the consequential penalties also could not survive.

Conclusion: Cenvat credit on the blades was admissible and the demand and penalties were liable to be set aside in favour of the assessee.

Ratio Decidendi: Duty-paid goods packed as part of a composite final product and functioning as accessories or inputs of that product are eligible for Cenvat credit, and denial of such credit cannot be sustained merely because they are marketed as free with the principal item.

---