2014 (3) TMI 912 - AT - Central Excise

Reversal of Cenvat credit - Denial on the ground that the activity of wire drawing does not amount to manufacture - Held that - demand of duty which has been confirmed by the adjudicating authority and set aside by the learned Commissioner (Appeals) is in respect of Cenvat credit availed by the assessee-respondent on the inputs used for drawing of wire. It is also not disputed that the final product cleared by the respondent-assessee is on payment of appropriate duty during the relevant period. We find that the learned Commissioner (Appeals) has correctly come to the conclusion that the disallowment of Cenvat credit is not in accordance with the law for more than one reason. First of all, 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 cited supra, will squarely apply in this case. Secondly the CBEC Circular dated 26-7-2006 also talks about regularisation of credits availed on inputs and duty paid on wires drawn by a retrospective amendments. We find that para 4.4 of the said CBEC Circular will apply in this case - Decided against Revenue.

Summary

Issues:
Appeal against Order-in-Appeal No. 164/C.E./DLH/2004 dated 14-12-2004 regarding availing of Cenvat credit on inputs for wire drawing activity.

Analysis:
The appeal was filed by Revenue challenging the availing of Cenvat credit on inputs for wire drawing activity by the respondents. The issue revolved around whether wire drawing amounts to "manufacture" as per the Apex Court judgment in the case of Technoweld Industries. The respondents contended that they cleared the final product by paying duty on value addition, not disputed by Revenue. The Commissioner (Appeals) relied on the Tribunal's decision in PSL Holdings Ltd. v. CCE and a Board's Circular to set aside the order-in-original.

The Revenue argued that as per the Apex Court judgment in Technoweld Industries, wire drawing does not constitute manufacture, making Cenvat credit on inputs ineligible as per Rule 6(1) of Cenvat Credit Rules, 2002. The Revenue sought to restore the order of the adjudicating authority, emphasizing that the period in question falls within the scope of the Apex Court judgment.

The respondents, however, pointed out that the duty was paid on the final product despite not being taxable, and referred to a Board's Circular amending Rule 16 retrospectively to allow credit for wire drawing units. They also cited the judgment of a Co-ordinate Bench in Venus Wire Industries Pvt. Ltd. v. CCE, Raigad to support their position.

Upon considering the arguments from both sides and examining the records, the Tribunal noted that the demand for duty was related to Cenvat credit on inputs for wire drawing. The Tribunal agreed with the Commissioner (Appeals) that disallowing the Cenvat credit was not legally justified. The Tribunal highlighted that the duty paid on the final product effectively reversed the Cenvat credit taken, aligning with the precedent set by the Tribunal in Venus Wire Industries. Additionally, the Tribunal referenced a CBEC Circular from 2006, which allowed for the regularization of credits on inputs and duty paid on wires drawn through retrospective amendments, specifically applying para 4.4 of the Circular to the case. Consequently, the Tribunal found no merit in the Revenue's appeal and rejected it, also disposing of the Cross Objection filed by the assessee in support of the impugned order.