Cenvat credit denied on free toothbrushes supplied with toothpaste because they were not inputs in manufacture.

Cenvat credit was held inadmissible on duty paid on toothbrushes purchased from the market and supplied free with toothpaste, because the toothbrushes were not used as inputs in the manufacture of the toothpaste. The fact that the assessee could independently export toothpaste or toothbrushes did not change their character for credit purposes. Since the purchased toothbrushes could not be treated as inputs for the toothpaste cleared by the assessee, credit of duty on those toothbrushes was not available, and the appellate finding was left undisturbed.

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Issues: Whether Cenvat credit was admissible on duty paid on toothbrushes supplied free with toothpaste cleared by the assessee.

Analysis: The toothbrushes were purchased from the market and packed along with toothpaste for free supply, but they were not used as inputs in the manufacture of toothpaste. The assessee could export the toothpaste manufactured by it without payment of duty or on payment of duty and seek rebate, and could also export toothbrushes as such if so desired. However, the purchased toothbrush could not be treated as an input for toothpaste, so credit of duty paid on the toothbrushes was not available. The adjudicating authority's view was supported and no sufficient ground was shown to disturb the appellate finding.

Conclusion: Cenvat credit on the toothbrushes was not allowable and the appeal failed.

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