2006 (8) TMI 415 - AT - Central Excise

Summary

Issues:
1. Application for waiver of pre-deposit and penalty.
2. Availing Cenvat credit for the manufacture of Wire and Bright Bars.
3. Disallowance of Cenvat credit and penalty imposition.
4. Interpretation of Taxation Laws (Amendment) Act, 2006 regarding wire drawing units.

Analysis:
1. The judgment dealt with an application for waiver of pre-deposit and penalty of Rs. 15,74,375/- each, which was granted by the Appellate Tribunal CESTAT, Mumbai with the consent of both parties after hearing them. The appeal was disposed of at this stage after granting the prayer for stay.

2. The appellants were involved in the manufacture of Wire and Bright Bars of Carbon and Alloy Steel under specific Chapter Headings of the CET Act, 1985. They cleared products by paying Central Excise duty under an exemption notification for the financial year 2003-04. The issue arose when they availed Cenvat credit, claiming that their activity did not amount to manufacture. A show cause notice was issued, leading to the disallowance of Cenvat credit and imposition of a penalty by the Addl. Commissioner. The Commissioner (Appeals) upheld this decision, prompting the appellants to file this appeal.

3. Upon hearing both sides, the Tribunal noted that the Taxation Laws (Amendment) Act, 2006 deemed the amount paid by wire drawing units as duty, thereby categorizing them as manufacturers. Consequently, the appellants were entitled to Cenvat credit since they had paid duty and taken credit for the amount paid. Given this legal framework, the Tribunal found no justification for disallowing the Cenvat credit. Consequently, the impugned order was set aside, and the appeal was allowed.

4. The interpretation of the Taxation Laws (Amendment) Act, 2006 was crucial in determining the eligibility of wire drawing units for Cenvat credit. The Act's classification of wire drawing units as manufacturers had a direct impact on the appellants' case, leading to the allowance of Cenvat credit based on the duty paid by such units. This legal interpretation played a pivotal role in the Tribunal's decision to overturn the previous order disallowing the Cenvat credit and imposing penalties.