2006 (8) TMI 412 - AT - Central Excise

Summary

Issues involved: Whether drawing of wire from wire rod amounts to manufacture or not.

Analysis:
The issue in this appeal revolves around determining whether the activity of drawing wire from wire rod constitutes manufacturing. The appellants, involved in manufacturing parts and accessories of electrical fans, have availed Cenvat credit on redrawn MS wires obtained from suppliers engaged in wire drawing. Previous Supreme Court decisions have established that wire drawing does not amount to manufacture and is not subject to central excise duty. However, the Assistant Commissioner of Central Excise issued show cause notices demanding recovery of wrongly availed Cenvat credit, which were confirmed along with penalties by the Commissioner (Appeals). The appeal challenges these decisions, with the appellants intending to file a separate appeal due to two conflicting orders.

The retrospective effect of the Taxation Laws (Amendment) Act, 2006 is crucial in this case. The Act clarifies that wire drawing from MS wire rods constitutes manufacture, effective from a specified period. The show cause notices in question fall within this period, and the Act's provisions now disallow Cenvat credit for such activities retrospectively. Considering these legal developments, the Tribunal finds a strong case in favor of the assessee. As a result, the pre-deposit requirement is waived, and a stay on recovery is granted pending further proceedings. This decision reflects the impact of legislative changes on the classification of wire drawing as a manufacturing process, influencing the availability of Cenvat credit for the appellants.