CENVAT CREDIT ON ICE CREAM.

[SANJEEV JADHAV]

Dear Sirs, Our management has ordered ice cream to all staffs and workers. As per order ice cream manufacturer has executed order and issued bill by charging excise duty 2% on ice cream under chapter 21050000. Can we avail cenvat credit on ice cream Bill.

[Rajagopalan Ranganathan]

Sir,

Please explain how ice cream is used in the manufacture or production of your final product. If you can prove the nexus between ice cream and your final product then you can avail the credit.

[SANJEEV JADHAV]

Dear Sir, Thanks you for reply. Their is no any nexus between ice cream and production. But same is given by management for motivation purpose. I got my point.

[DR.MARIAPPAN GOVINDARAJAN]

You cannot take credit as it has no nexus with the activities of manufacturing.

[Himansu Sekhar]

Sir,

Kindly note two points

1. As per Notf. no. 1/11 amended woth Notf 16/12, the commodities are charged with 2% duty. Proviso to Rule 3(1)(i) credit on such goods cannot be taken

2. In one decision Hon'ble Trinual questioned the increase in production by supply of Breads to the works. Also Please refer to the Decision of Hon'ble High Court in the Case of Manikgarh cement.

Hence there is no iota of doubt about ineligibility of credit.

With due regards

[KASTURI SETHI]

Credit not allowed. I support the views of all experts

[Himansu Sekhar]

Thank you Sir

[KASTURI SETHI]

When law is very much clear, any case law even if in favour of manufacturer on the ground of promotional activity, shall not help the querist at all. Any judgement helps only if there is confusion in law.

[SANJEEV JADHAV]

Dear All Experts, I thanks all of you for your valuable suggestion. We will not take cenvat credit on Ice Cream as per your suggestion.

[KASTURI SETHI]

Dear Querist,

By agreeing to the views of experts you have saved yourself from the rigours of litigation.

[Ganeshan Kalyani]

For e.g. a safety week campaign in going on in a factory. After successful completion of the campaign, every staff and worker of a factory is being offered ice-cream as a refreshment. Since, safety is utmost important in a factory. It has impact on the manufacturing activity. By learning from the campaign the workers are able to work safely. The mishaps /accidents are less resulting in more production. Saving time. Now workers are able to work more as they are aware of safety norms. Thus, it can be said that there is link of the safety activity with the manufacturing activity. The expenses incurred to conduct safety week is a safety expenditure. It should not be said as welfare to the employee, but an important condition in a factory. Thus the expense incurred in course of conducting safety week is having a link with the production. So, should the credit on purchase of ice-cream be allowed to avail cenvat credit?

[Ganeshan Kalyani]

As per provision cenvat on ice-cream which is refreshment is not eligible for cenvat credit. My previous reply is to invite discussion only.

[Himansu Sekhar]

1. the ice cream in question has suffered 2% duty which is not eligible for credit.

2. The credit on icecream if allowed, will be taken as inputs. Then the relevant Rules as per Rule 2(k) read as under

[(k) “input” means -

(i) all goods used in the factory by the manufacturer of the final product; or

X X X

but excludes -

X X X

(E) any goods, such as food items, goods used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and

(F) any goods which have no relationship whatsoever with the manufacture of a final product.

Definition of Final product as per Rule 2(h)

Rule-2(h) of the Rules - Final product means excisable goods manufactured or produced from input, or using input service

As enumerated above, ice creams being foods items are not eligible for credit. Further as excluded from the definition of inputs as used for consumption by employees.

Also the items are not integrally connected with the manufacture of excisable goods. In my view credit is not allowed.

[Ganeshan Kalyani]

Thanks Sri Himansu Sir for sharing your views.Thanks

AI Summary

Cenvat credit ineligibility on employer-provided food where items lack nexus with manufacture and are excluded as employee consumption.
Cenvat credit on ice-cream supplied to staff is not allowable because food items used primarily for employee consumption are excluded from the definition of inputs, and a proviso in the credit rules renders commodities charged under the notified concessional duty ineligible for credit; absent a demonstrable nexus between the ice-cream and the manufacture of excisable final products, promotional or motivational supplies do not qualify for credit.