2020 (8) TMI 692 - AT - Central Excise

Tribunal grants CENVAT credit for camera accessories, setting aside denial.

M/s. Hical India Private Limited Versus Commissioner of Central Excise-I, Bangalore

The Tribunal ruled in favor of the appellant, M/s. Hical Technologies Pvt. Ltd., allowing the appeals and setting aside the denial of CENVAT credit, ... CENVAT Credit - input - film rolls - Kodak branded film rolls supplied free of cost, to be packed in a combo pack along with the camera which is manufactured by the appellant for Kodak - HELD THAT:- The identical issue pertaining to available of credit, in the hands of camera manufacturer, on film rolls has been decided by this Tribunal in the case of KODAK INDIA LTD. VERSUS COMMISSIONER OF C. EX., BANGALORE [2002 (9) TMI 440 - CEGAT, BANGALORE], under the erstwhile provisions contained in Central Excise Rules, wherein it has been held that film rolls cleared with camera will constitute ‘accessories’ to the camera and eligible for credit. Ld. Commissioner erred in not appreciating that the film-rolls were very much considered as ‘accessories’ to a camera and once the same is considered as ‘accessories’, it qualifies as ‘input’ as defined in Rule 2(k) of the Credit Rules, as applicable during the impugned period and becomes duly eligible for credit. Moreover, when the film roll is being clubbed with the camera and both packed in a combi-pack, the MRP of the combi-pack will obviously include the value of film roll and eligible for credit. CENVAT Credit allowed - Appeal allowed - decided in favor of appellant. Issues:1. Denial of CENVAT credit by the Ld. Commissioner, Bangalore from December 2005 to March 2010.2. Disallowance of credit on film rolls supplied free of cost by another company for bundling with the camera.3. Interpretation of whether film rolls qualify as 'accessories' and 'input' as per CENVAT Credit Rules, 2004.4. Assessment of whether the value of film rolls should be included in the assessable value of the final product.5. Comparison with previous tribunal decisions and High Court judgments regarding similar cases.Issue 1: Denial of CENVAT CreditThe appeals were filed by the assessee, M/s. Hical Technologies Pvt. Ltd, challenging the denial of CENVAT credit by the Ld. Commissioner, Bangalore from December 2005 to March 2010. The denial was based on the disallowance of CENVAT credit, imposition of interest, and penalty related to the manufacture of cameras under a contract agreement with another company.Issue 2: Disallowance of Credit on Film RollsThe dispute centered around the disallowance of CENVAT credit on film rolls supplied free of cost by Kodak for bundling with the cameras manufactured by the appellant. The Ld. Commissioner contended that the film rolls were not considered 'input' as per the CENVAT Credit Rules, 2004, leading to the denial of credit.Issue 3: Qualification of Film Rolls as 'Accessories' and 'Input'The key contention was whether the film rolls could be classified as 'accessories' to the camera and qualify as 'input' as defined in Rule 2(k) of the Credit Rules. The appellant argued that the packing of the camera with the film roll in a combo-pack constituted a manufacturing process, making the film roll an eligible input.Issue 4: Inclusion of Film Roll Value in Assessable ValueThe debate also revolved around whether the value of the film rolls should be included in the assessable value of the final product, considering the nature of the manufacturing agreement and the bundling of camera and film rolls in a combo-pack.Issue 5: Comparison with PrecedentsThe Tribunal referred to previous decisions, notably the case of Kodak India Ltd, to establish that film rolls supplied along with the camera could be considered 'accessories' and thus eligible for credit. The Tribunal also cited the Hon'ble Gujarat High Court's judgment to support the eligibility of credit on items like film rolls when bundled with manufactured products.In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeals and setting aside the denial of CENVAT credit, demand of duty, interest, and penalty. The decision emphasized that film rolls supplied free of cost and bundled with the camera should be considered 'accessories' and eligible 'input' for claiming credit, aligning with previous judicial interpretations and the provisions of the CENVAT Credit Rules, 2004.