2011 (7) TMI 605 - AT - Central Excise

Reversal of Cenvat credit - activity of wire drawing does not amount to manufacture - Held that - Disallowment of Cenvat credit is not in accordance with the law firstly as the duty discharged by the appellant on the final product will in a way amount to reversal of Cenvat credit taken and the ratio of the order of the Tribunal in the case of VENUS WIRE INDUSTRIES PVT. LTD. Versus COMMR. OF C. EX., RAIGAD 2007 (12) TMI 332 - CESTAT, MUMBAI will squarely apply in this case. Secondly the CBEC Circular dated 26.7.2006 also talks about regularization of credits availed on inputs and duty paid on wires drawn by a retrospective amendments - in favour of assessee.

Summary

Issues:
- Availing of Cenvat credit on inputs for wire drawing
- Whether wire drawing amounts to manufacture for Cenvat credit eligibility

Analysis:
The appeal before the Appellate Tribunal CESTAT, DELHI was filed by the Revenue against an order-in-appeal dated 14.12.2004. The respondents availed Cenvat credit on inputs for copper wire and copper wire rods used in manufacturing wire and copper strips. A show cause notice was issued seeking reversal of the Cenvat credit on the grounds that wire drawing does not constitute manufacture as per a Supreme Court judgment. The adjudicating authority confirmed the demands, imposed penalties, and interest, which the respondents contested. The Commissioner (Appeals) set aside the original order based on a Tribunal decision and a Board's Circular.

The Revenue argued that as per a Supreme Court judgment, wire drawing does not amount to manufacture, making the Cenvat credit ineligible under Rule 6(1) of the Cenvat Credit Rules, 2002. They contended that the Cenvat credit availed during the relevant period was incorrect and should be restored. On the other hand, the respondent's counsel highlighted that the final product was cleared by paying duty on value addition, not disputed by the Revenue. They referred to a Board's Circular amending Rule 16 retrospectively for wire drawing units and a Co-ordinate Bench judgment.

After considering the submissions and records, the Tribunal noted that the demand was regarding Cenvat credit on inputs for wire drawing, while the final product was cleared with appropriate duty payment during the relevant period. The Tribunal agreed with the Commissioner (Appeals) that disallowing the Cenvat credit was not legally justified. They reasoned that the duty paid on the final product effectively reversed the Cenvat credit taken. Additionally, they cited a Tribunal order and a CBEC Circular supporting the regularisation of credits on inputs and duty paid on wires drawn. Consequently, the appeal by the Revenue was rejected, and the Cross Objection by the assessee was disposed of in support of the impugned order.