ORDER
C.N.B. Nair, Member (T)
1. The appellant is a manufacturer of shaving razors. The present appeal is in regard to Gillette brand disposable shaving razors manufactured on job work basis for M/s. Indian Shaving Products Ltd. (ISPL) during the period March, 1999 to November, 1999. As the issue raised in all these appeals is the same, they were heard together and are disposed of under this common order.
2. Facts material to the present dispute are that the appellant undertook the manufacture of Gillette Presto International (GPI) razors as a job work from ISPL. All the parts and materials required for the manufacture of GPI razors were received by the appellant from M/s. ISPL. The appellant also took Modvat credit of the duties paid on these parts and materials and used that credit for payment of duty on the final product. The process of manufacture of GPI razors is to assemble a handle and twin blade into a razor and to pack the assembled razor.
2.1. As a sales promotion measure, M/s. ISPL decided to supply one GPI razor free to buyers of a tuck of five “7 O’clock Permasharp Stainless Steel Blades”. For this purpose, a tuck each of “7 O’clock Permasharp Stainless Steel Blades and GPI razors were required to be packed together. In order to facilitate this M/s. ISPL supplied tucks of five “7 O’clock blades also to the appellant for being packed along with each GPI. The appellant treated the tucks of “7 O’clock blade” also as inputs in the manufacture of GPI and took credit of the duty paid in respect of the tucks “7 O’clock blades supplied by M/s. ISPL. It assembled GPI razors from the parts and materials received from ISPL and packed them along with the tuck of five 7 O’clock blades with a combination pack and returned them to M/s. ISPL after payment of duty. The credit of duty taken in respect of the blades was also used towards payment of Central Excise duty on the combination pack.
2.2. As GPI razors manufactured by the appellant were being distributed free upon purchase of a tuck of five 7 O’clock blades, the sale price of the tuck of five 7 O’clock blade as well as the combination pack of a tuck of
blade and one GPI razor remained the same i.e. Rs. 23/-.
3. In the impugned orders, the Central Excise authorities have held that the appellants had wrongly availed Modvat credit in respect of “7 O’clock blades”. It is their contention that the tuck of 7 O’clock blade is a fully manufactured product in itself and it is not an input in the manufacture of razor blades inasmuch as the blades are not used in or in relation to the manufacture of GPI razor. The impugned order has therefore, disallowed the Modvat credit taken in respect of the tucks of 7 O’clock blades. The order has also demanded differential duty arising on account of holding that duty paid on the blades is not available as input credit for discharging duty on blades.
4. In the present appeal it is submitted on behalf of the appellant that the tuck of 7 O’clock blade and GPI razor is a combination pack and that the combination pack is required to be dealt with together as a manufactured product and duty assessed. It has been explained that the manufacture of the combination pack involved assembly of the razor from its parts and then blister packing of the razor along with the tuck of five 7 O’clock blades as a combination pack. The appellant also submits that since packing is a part of manufacturing activities, in the present case, the combination pack is required to be assessed as one unit. The contention of the appellant is that the tuck of five 7 O’clock razor blades, which they received from M/s. ISPL, is also required to be treated as an input in the manufacture of the combination pack of blades and GPI razors. The appellant has heavily relied on the decision of the Supreme Court in the case of Sidhartha Tubes Ltd. – 2000 (115) E.L.T. 32 (S.C.) in support of the contention that all processes including packing are required to be taken into account while assessing goods to duty and all materials go into manufacture are eligible for credit as inputs. They have also relied on the decisions of the Supreme Court in the cases of Tata Engineering & Locomotive Company Ltd. v. State of Bihar – 1994 (74) E.L.T. 193; Collector of C. Ex. v. Eastend Paper Industries Ltd. – 1989 (43) E.L.T. 201 and Collector of C. Ex. v. Balrampur Industries Ltd. – 1989 (43) E.L.T. 804 in support of their contention that all inputs used in or in relation to the manufacture are required to be allowed Modvat credit. It is their contention that disregarding the tuck of five 7 O’clock blades as an input is not legally correct at all. They have also submitted that since blades and razors are required to be assessed based on their MRP, the Central Excise authorities cannot discard the MRP of the combination pack and assess the GPI razor alone to Central Excise duty based on the MRP of a single GPI razor. Appellant has contended that the authorities were not right in assessing the GPI razors adopting the MRP of Rs. 10/- per piece, since the combination packs were bearing MRP of Rs. 23/-and not Rs. 10/-. They have submitted that the assessment should have been under Section 4 of the Central Excise Act and not under Section 4A of the Act. It has further been contended that the fact of free supply of GPIs and the price of the combination pack being the same as that of 5 blades are not relevant to the question of eligibility for Modvat credit inasmuch as every manufacturing activity need not lead to value addition. The appellant has also submitted that imposition of penalty was not justified as the case did not involve any contumacious conduct on the part of the appellant and full details of transactions had been disclosed to the Revenue.
5. As against the aforesaid contentions on behalf of the appellant,
the learned SDR has submitted that the appellant’s claim that the tuck of five 7 O’clock blades is an input in the manufacture of GPI razor has no legal or factual basis. He pointed out that under Rule 57A, Modvat credit is available only to goods (inputs) used in or in relation to the manufacture of the final product. He has pointed out that in the present case, the appellant had manufactured GPIs. The product in question is a razor, a twin blade fixed on a handle. It is the learned SDK’s contention that the tuck of five 7 O’clock razor blades is not an input at all in the manufacture of GPI razor and the 7 O’clock blades cannot even be used with the razor in question. Instead, the tuck of 7 O’clock blade is a different product altogether from the disposable GPI razor. According to the learned SDK, neither of the two products (blades & GPI razors,) can be an input in the manufacture of the other since both are entirely separate final products. It is also his submission that since it is settled law that packing of finished goods together does not amount to manufacture of new goods, the appellant could not claim that the blister packing of the GPI razor and tuck of blades is a manufacturing activity. In these circumstances, the learned SDR has submitted that denial of Modvat credit in respect of the tuck of 7 O’clock blade and demand of duty on the GPI razors have been correctly done. The learned SDR has submitted that the appellant’s ineligibility for Modvat credit in respect of the blades remains settled by the decision of this Tribunal in the case of Jaggsonpal Pharmaceuticals ltd. v. CCE. New Delhi -1997 (92) E.L.T. 414. With regard to the valuation of GPI razors, the learned SDR has pointed out that the blades in question were the same as other GPI razors sold at the MRP of Rs. 10/- per GPI razor and that justified adoption of the MRP of Rs. 10/- and working out assessable value by allowing permissible deduction since razors and blades were required to be assessed based on their MRP under Section 4A of the Central Excise Act.
6. We take up the claim for Modvat credit in respect of the tuck of 7 O’clock blades first. The tuck is a pack containing five 7 O’clock blades. It is a retail pack of blades and is marketed under the MRP declared on the tuck. It is a fully manufactured item. Rule 57A of the Central Excise Rules relates to eligibility for Modvat credit on inputs. In terms of that rule credit is available only in respect of duty paid on goods (inputs) used in or in relation to the manufacture of the final product. In the present case, razor is assembled by fixing a twin blade on the handle of the razor. The tuck of “7 O’clock” blade has no place in the manufacture of the Presto Razor. It takes no part. It is not even an accessory inasmuch as these blades are not compatible with the razor. This razor is for one time use and is discarded thereafter. The “7 O’clock” blades in question cannot be mounted/fixed on the handle of GPI razor. It is clear from these facts and circumstances that the 7 O’clock blade in the tuck are not inputs in the manufacture of GPI razors. Accordingly, the appellant could not have claimed 7 O’clock blades as an input and taken credit of duty paid on them and used that duty for discharging duty on GPI razors. The legal position on the issue is clear from the decision of this Tribunal in the case of Jaggsonpal Pharmaceuticals Ltd. v. Collector of Central Excise, New Delhi – 1997 (92) E.L.T. 414. In that case, the appellant was a manufacturer of medicine and claimed that the disposable syringe and needle which were blister packed with the ampoule of medicine was an input in the manufacture of the medicine. That claim was rejected by the Tribunal holding that the syringe and needle are not inputs in the manufacture of medicine. In that
case, syringe and needle were useful accessories in dispensing the medicine sold together with them. Unlike that, in the present case, the 7 O’clock blade in question is not even an accessory for the disposable twin blade razor as blade in question is not compatible with the razor. In these circumstances, we agree with the Revenue that the blades cannot be treated as input and credit allowed. We find that the decisions of the Apex Court cited by the appellant on the issue of eligibility to Modvat credit have no application to the facts of the present case.
7. With regard to valuation, the appellant’s objection to assessment based on the MRP of Rs. 10/- per piece is that these razors are not individually packed by the appellants with MRP of Rs. 10/-, declared on the packet, instead they are packed along with blades and the MRP declared on the combination packing is Rs. 23/-. The appellant has contended that the Revenue authorities were incorrect in adopting a notional MRP of Rs. 10/- for valuation and assessment of the razors. To this, the reply of learned SDR is that since the disposable razors in question, when packed in individual packs, bear MRP declaration of Rs. 10/-, the same will be the basis of valuation even when the razor blades were assessed under Section 4 of the Central Excise Act based on value of the comparable goods. We are in agreement with the learned SDR on this point. Razors and blades are required to be valued based on their MRP in view of notification issued under Section 4A of Central Excise Act. When these disposable razors are packed and sold singly their MRP is Rs. 10/- per piece. The razors packed in the combination packing are the same as those razors sold under MRP of Rs. 10/-. In such a situation, the razor in question would be correctly assessable based on the MRP of Rs. 10/-. This being the legal position, the appellant’s challenge to the method of valuation has to fail.
8. We find that there is no mis-declaration, mis-statement, suppression of facts or fraud on the part of the appellant. In such a case imposition of penalty was not called for. The penalties imposed in the impugned orders are required to be set aside.
9. In view of our findings above, the impugned orders are con
firmed with regard to denial of Modvat credit and demand of Central Excise
duty. However, penalties imposed are set aside. The appeals are ordered accordingly.