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2011 (6) TMI 221 - AT - Central ExciseCenvat Credit - payment of excise duty on non dutiable goods by the supplier of inputs - wires had been received by the respondent during the period from August 2003 to 08.07.04 i.e. during the period for which the 1st and 2nd provisos had been added to sub-rule (3) to Rule 16 Held that - amount paid by the manufacture suppliers of wire on the clearance of wire has to be treated as duty and respondent who had received the wire would be eligible for its Cenvat credit. The only aspect which has to be checked in as to whether the wire manufacturers had obtained refund of the duty paid by them on the wire and in case they have taken the refund the respondent would not be eligible for Cenvat credit order is set aside and the matter is remanded to the original adjudicating authority for de-novo adjudication
Issues Involved:
1. Eligibility for Cenvat Credit on wires received from wire manufacturers. 2. Application of Supreme Court judgment in Technoweld Industries case. 3. Impact of notification No.28/2010/CE and retrospective amendment to Rule 16 of the Central Excise Rules. Issue-wise Detailed Analysis: 1. Eligibility for Cenvat Credit on Wires Received from Wire Manufacturers: Facts: The respondents, manufacturers of 'Lead in Wire' used in lamps and tubes, availed Cenvat Credit on various types of wires purchased from wire drawing units. The Cenvat Credit taken amounted to Rs.18,59,681/- for the period from August 2003 to August 2004. Department's View: Based on the Supreme Court judgment in Technoweld Industries, the department argued that drawing wires from wire rods does not constitute manufacture. Therefore, the duty paid on such wires was not Central Excise duty, making the respondents ineligible for Cenvat Credit. Respondent's Argument: The respondents contended that since the jurisdictional Central Excise authorities accepted the duty paid by wire manufacturers, the Cenvat Credit cannot be denied. They cited the Supreme Court judgments in CCE vs. MDS Squares Ltd. and Eveready Industries India Ltd. and relied on Section 5B of the Central Excise Act and notification No.28/2010/CE. Tribunal's Finding: The Tribunal noted that the notification No.28/2010/CE applies only to wires falling under Chapter 72 of the Central Excise Tariff, whereas most wires in question fell under Chapter 74, except ferrous-based resistance wire. However, a retrospective amendment to Rule 16 of the Central Excise Rules by Section 39 of the Taxation Laws (Amendment Act), 2006, allowed the amount paid as duty on wires to be treated as Central Excise duty for the period from 29.05.03 to 08.07.04. 2. Application of Supreme Court Judgment in Technoweld Industries Case: Department's View: The department argued that the Supreme Court's decision in Technoweld Industries, which held that drawing wires from wire rods is not manufacture, invalidates the duty paid on such wires and thus the Cenvat Credit. Respondent's Argument: The respondents argued that the duty paid by wire manufacturers, accepted by the jurisdictional authorities, should be treated as valid for Cenvat Credit purposes. Tribunal's Finding: The Tribunal acknowledged the Supreme Court's judgment but emphasized the retrospective amendment to Rule 16, which regularized the duty paid on wires and allowed it to be treated as Central Excise duty for Cenvat Credit purposes. 3. Impact of Notification No.28/2010/CE and Retrospective Amendment to Rule 16: Respondent's Argument: The respondents relied on notification No.28/2010/CE issued under Section 5B of the Central Excise Act, which allowed non-reversal of Cenvat Credit for wires drawn from wire rods, subject to certain conditions. Tribunal's Finding: The Tribunal clarified that the notification No.28/2010/CE applies only to wires under Chapter 72. However, the retrospective amendment to Rule 16 covered the period from 29.05.03 to 08.07.04, allowing the amount paid as duty on wires to be treated as Central Excise duty, thereby validating the Cenvat Credit taken by the respondents. Conclusion: The Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for de-novo adjudication. The authority was directed to verify if the wire manufacturers had obtained a refund of the duty paid on wires. If no refund was taken, the respondents would be eligible for Cenvat Credit. The appeal was disposed of accordingly. Pronouncement: The judgment was pronounced on 5.7.2011.
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