Commissioner Of Central Excise vs Dynavista Industries (P) Ltd

[Arising out of Order-in-Appeal No.124/2008 (M-II) dt. 13.4.2009 passed by the Commissioner of Central Excise (Appeals), Chennai]

Commissioner of Central Excise, Chennai-II Appellant

Versus

Dynavista Industries (P) Ltd. Respondent

Appearance:

Shri K.P. Muralidharan, AC (AR) For the Appellant Shri B.N. Gururaj, Advocate For the Respondent

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing/decision :17.3.2015

FINAL ORDER No.40426/2015

Revenue filed appeal against the impugned order dt. 13.4.2009 passed by Commissioner (Appeals). The facts of the case are that the respondents are manufacturer of Kite Detergent Powder falling under Chapter 34 of the CETA'85 and getting bulk detergent powder from their units located at Pondicherry and repacking the same into 500 gms/20 gms retail packs and discharged duty on M.R.P. value under Section 4A. While clearing the goods, the appellants were also clearing in combi-pack containing free offer of detergent soap along with washing powder of 500 gms. pack detergent soap was packed inside the washing powder pack. A show cause notice dt. 4.5.2007 was issued denying Cenvat credit availed on the detergent soap which was supplied free along with detergent powder. The adjudicating authority confirmed the demand of cenvat credit of Rs.7,22,342/- along with interest and imposed equivalent penalty. Respondents preferred appeal and Commissioner (Appeals) in his impugned order allowed the appeal and set aside the order. Hence Revenue filed the present appeal.

2. Heard both sides.

3 Ld. A.R reiterates the grounds of appeal and submits that detergent cake is not an input for manufacture of detergent powder and they are not eligible for the input credit availed on the detergent soap which was supplied free along with detergent powder. He reiterated the grounds of appeal. He submits that a detergent soap is a finished product and separately marketable and it cannot be considered as appellants have manufactured finished product. He relied on the following case law :-

(1) G.S. Enterprises Vs Commissioner 2003 (151) ELT A297 (SC)

(2) Shri Warna Sahakari Dudh Utpadak Prakriya Sangh Ltd. Vs CCE Pune-II -2007 (209) ELT 196 (Tri.- Mumbai)

(3) Perfetti Van Melle India Pvt. Ltd. Vs UOI  2010 (254) ELT 620 (P&H)

4. On the other hand, Ld. Advocate for the respondent reiterated the findings of the impugned order and submitted that Commissioner (Appeals) has rightly allowed their appeal. He further submits that their goods is falling under the category after the amendment of Section 2 (f) of Central Excise Act, 1944 where labelling and relabeling amounts to manufacture and it is covered under the third Schedule to the Central Excise Act. Sl.No.40 & 41 of the third Schedule clearly covers soaps in any form. He further submits that Note (6) of Chapter 34 clearly provides that labelling or relabeling of containers or repacking from bulk packs to retail packs or adoption of any other treatment to render the product marketable shall amount to manufacture. Therefore, their goods are covered under Chapter 34 and also goods are covered under the M.R.P. under Section 4A where they have put the free supply inside the detergent powder and packed in a single pack on which the M.R.P has been printed and correctly discharged duty under M.R.P. He further submits that Commissioner (Appeals) has rightly relied the Tribunals decision in the case of Lotte India Corporation Ltd. Vs CCE and other Tribunals decisions. He relied the following case law :-

(1) Lotte India Corporation Ltd. Vs CCE Pondicherry 2008 (224) ELT 102 (Tri.-Chennai) (2) CCE Vs Gupta Soaps 2007 (213) ELT 372 (Tri.-Mumbai) (3) Prime Healthcare Products Vs CCE Daman 2009 (245) ELT 550 (Tri.-Ahmd.) (4) CCE Daman Vs Healthcare Products 2011 (272) ELT 54 (Guj.)

5. I have carefully examined the facts and the grounds of appeal by the Revenue. Revenues only ground is that free supply of detergent soap which was packed inside the detergent powder and therefore respondents are not eligible to avail cenvat credit on the duty paid on the detergent soap as it is not an input. I find that the lower appellate authority in his order has clearly discussed the issue at length and relied this Tribunals decision in the case of Lotte India Corporation Vs CCE Pondicherry (supra). In the present case, Revenue has not disputed the fact that respondent has discharged central excise duty on the detergent powder packed in 500 grams and also not disputed the fact that respondents have discharged duty under Section 4A under M.R.P. price. As seen from the file, respondents had packed free supply of one detergent soap (valueRs.5 per piece) inside the washing powder of 500 gms. and correctly declared the net weight of the combi-pack of 575 gms. and discharged duty on the detergent powder. The respondents are rightly covered under Section 2(f) (3) of Central Excise Act. The lower authority has rightly relied on decision of this Bench of the Tribunal in the case of Lotte India Corporation Ltd. (supra). Further, I find that the Honble High Court in the case of CCE Vs Prime Healthcare Products - 2011 (272) ELT 54 (Guj.) wherein the Honble Gujarat considered this Tribunals decision passed in the case of Lotte India Corporation (supra) and dismissed the Revenues appeal and upheld the Tribunals order. The relevant paragraphs of the Honble Gujarat High Court judgement (supra) are reproduced as under:-

"10.?We have examined this reasoning of the Tribunal in view of the provisions contained in Cenvat Credit Rules, 2004. Rule 3(1) of the Rules says that a manufacturer or producer of final product or a provider of taxable service shall be allowed to take credit of items mentioned therein. The proviso further states that the cenvat credit shall be allowed to be taken of the amount equal to central excise duty paid on any input or capital goods received in the factory of manufacture of final product. The word input is defined in Rule 2(k) which also includes accessories of the final products cleared along with final product. There is no dispute about the fact that on toothbrush, excise duty has been paid. The toothbrush is put in the packet along with the tooth paste and no extra amount is recovered from the consumer on the toothbrush. Considering the definition given in the Rules of input and the provisions contained in Rule 3, we are of the view that the Tribunal is justified in taking the view that the credit is admissible in the case of the respondent-assessee.

11.?The view taken by the Tribunal is further supported by the provisions contained in Section 2(f) of the Central Excise Act, 1944 which defines the word manufacture. It includes any process in relation to the goods specified in the Third Schedule, which includes packing or re-packing of such goods in a unit container. In the Third Schedule, at Serial No. 38, under Heading - Sub-Heading of Tariff Item, Entry No. 3306, is in respect of tooth paste. Hence, the process of packing and re-packing the input, that is, toothbrush and tooth paste in a unit container would fall within the ambit of manufacture as defined under the Act and as such, the assessee would be entitled to claim cenvat credit on such input.

12.?In the above view of the matter, we are of the view that no question of law, much less any substantial question of law arises out of the impugned order of the Tribunal. Hence, we dismiss this appeal."

6. Though Revenue has relied on Tribunals decision (supra) and Honble High Court of Punjab & Haryana in the case of Perfetti Van Melle India Pvt. Ltd. Vs UOI (supra), I find that above decision is not applicable to the facts of the present case as the said decision was rendered by the Hon'ble High Court during the period prior to Section 2(f) amendment. Therefore, the same is not applicable to the facts of the present case as the present case relates to the period after the amendment of Section 2(f). Therefore, I am of the considered view that the ratio of the Honble Gujarat High Court judgement (supra) is rightly applicable to the present case. Therefore, I do not find any infirmity in the orders of the Lower Appellate Authority since he has rightly relied on this Tribunals decision which has been upheld by the Honble Gujarat High Court in the judgement cited supra. Accordingly, the impugned order is upheld and revenues appeal is rejected.

(Operative part of the order pronounced in open court on 17.3.2015)

(R. PERIASAMI) TECHNICAL MEMBER

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