2008 (9) TMI 630 - AT - Central Excise

Summary

Issues:
Admissibility of CENVAT credit on packing material used in relation to the manufacture of final products.

Analysis:
1. The appeal filed by the Revenue challenged the order of the original authority vacated by the Commissioner (Appeals) regarding the demand for CENVAT credit availed by the respondent, a company repackaging bulk coffee powder into retail packets. The dispute centered around whether the duty paid on secondary packing materials like plastic buckets, jars, and steel bowls used for packing instant coffee powder in pouches was eligible for CENVAT credit.

2. The respondent contended that the packing materials were essential inputs for the manufacture of excisable goods, citing Chapter Note 7 of Chapter 21, which considers any treatment to make a product marketable as manufacturing. The respondent argued that paying duty on the Maximum Retail Price (MRP) of the goods, which included packing costs, discharged their duty liability. They claimed eligibility for CENVAT credit on the packing materials used.

3. The Revenue's main argument was that the secondary packing materials were gift items and not inputs for the final product's manufacture. They alleged that the respondent improperly availed CENVAT credit on packing materials that were not eligible. The original authority upheld this view and demanded the repayment of the credited amount along with interest.

4. The respondent's counsel argued that both primary and secondary packing materials fell under the definition of inputs as per the CENVAT Credit Rules, 2002. They contended that the respondent had paid duty on the excisable goods manufactured and cleared, making them eligible for the CENVAT credit on the packing materials. Reference was made to a previous Tribunal decision supporting the respondent's position.

5. The Member analyzed the case records and the arguments presented. Referring to Rule 2(g) of the CENVAT Credit Rules, 2002, which defines 'inputs,' and Section 4A of the Central Excise Rules, 1944, regarding valuation based on MRP, it was concluded that packing materials used in the manufacture of final products qualified as inputs eligible for CENVAT credit. The Member highlighted that paying duty on MRP constituted compliance with the law and that the packing materials were covered under the definition of 'inputs.'

6. Citing Explanation 1 to Section 4A, which defines 'retail sale price,' the Member emphasized that the MRP included packing costs, making the duty paid comprehensive. Drawing from a previous Tribunal decision with similar circumstances, the Member upheld the respondent's eligibility for CENVAT credit on duty paid for packing materials used in the manufacturing process.

7. Ultimately, the appeal by the Revenue was dismissed as lacking merit, following the precedent set by the Tribunal's decision cited in the case, which affirmed the entitlement to CENVAT credit on duty paid for raw materials used in packing materials.