Cenvat credit on advertisement and sales promotion services remains admissible where Rule 15 does not extend to business-related input services.

Rule 15 of the Pan Masala Packing Machine Rules, 2008 is a restrictive non-obstante provision that denies credit only for input, capital goods or input services used in the manufacture of notified goods. Rule 2(l) of the Cenvat Credit Rules, 2004 defines input service more broadly to cover services used directly or indirectly in or in relation to manufacture, including business-related services. On that footing, advertisement and sales promotion services for 100 gram tin packs of panmasala were treated as services relating to business, not as services used in manufacture itself. The article concludes that Rule 15 did not bar Cenvat credit merely because the same product was also cleared in retail pouches under a different duty scheme.

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Issues: Whether advertisement and sales promotion services used for the 100 gram tin packs of panmasala were hit by the prohibition in Rule 15 of the Panmasala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008 so as to deny Cenvat credit, in whole or in proportion, on the ground that such services also promoted the retail pouches cleared under the compound levy scheme.

Analysis: Rule 15 of the Panmasala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008 is a restrictive, non-obstante provision which denies credit only of input, capital goods or input services used for manufacture of notified goods. Rule 2(l) of the Cenvat Credit Rules, 2004 defines input service in wider terms and includes services used directly or indirectly, in or in relation to manufacture and also services relating to business. Advertisement and sales promotion services are not used in the manufacture of panmasala itself but in relation to the business of manufacture. The Court found that the prohibition in Rule 15 does not extend to such advertisement services merely because the same product is also sold in retail pouches under a different duty mechanism.

Conclusion: Cenvat credit on the advertisement and sales promotion services was admissible and the denial of proportionate credit was unsustainable.

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