2007 (12) TMI 66 - AT - Central Excise

Tribunal rules in favor of appellants regarding Cenvat credit for combined products

LOTTE INDIA CORPORATION LTD. Versus COMMISSIONER OF C. EX., PONDICHERRY

The Tribunal ruled in favor of the appellants, holding that the packing of butter scotch with coffee bite constituted a manufacturing process under ... In the instant case the coffee bite manufactured by the appellants and the bought out item butter scotch are packed together and sold on payment of duty on the MRP marked on the combination pack – as per sec. 2(f) combipack is a manufactured product - assessee is eligible for the credit of duty paid on the butter scotch it purchased - impugned order is seeking to recover the credit availed on butter scotch and to penalize the assessee is not sustainable Issues:Interpretation of the term 'manufacture' under Section 2(f) of the Central Excise Act, 1944 in relation to goods packed together for sale.Analysis:The case involved the appellants purchasing sugar confectionary, specifically 'butter scotch,' and availing Cenvat credit on the goods. The butter scotch was packed inside another product, 'coffee bite,' and given away free with it. The authorities contended that no manufacturing process was involved in selling the products together, leading to the denial of Cenvat credit on the butter scotch and imposition of a demand, interest, and penalty.The appellants argued that the packing of butter scotch with coffee bite constituted a manufacturing process under Section 2(f) of the Central Excise Act, 1944. They relied on the provision that includes packing or repacking of goods in a unit container as part of the manufacturing process. The goods were classified under different headings in the Central Excise Tariff Act, falling under the Third Schedule.The Tribunal analyzed the situation and determined that the combination pack of coffee bite and butter scotch constituted a manufactured product. Referring to the notes in Section 2(f)(iii) of the Central Excise Act, it was established that the appellants were eligible for the Cenvat credit on the butter scotch. The Tribunal's decision was supported by a previous case law, Gupta Soaps, which upheld the availability of credit on goods sold in combination packs.Consequently, the Tribunal set aside the impugned order that sought to recover the credit availed on the butter scotch and penalize the assessee. The appeal was allowed in favor of the appellants, affirming their right to the Cenvat credit on the butter scotch packed with the coffee bite. The stay petition filed by the appellants was also disposed of in light of the decision.