2016 (5) TMI 835 - AT - Central Excise

Eligibility for Cenvat credit on inputs - Wire rod - Conversion of wire rod into Copper Coated CO2 Mig Welding Wire - Whether a process of drawing of the wire and amounts to manufacture or not - Held that - as per Rule 16 of the Central Excise Rules, 2002, it is clear that the assesee is entitle to avail Cenvat credit on the duty paid goods even though the said duty paid goods does not undergo manufacturing process. The only condition is that if the duty paid goods is cleared after process which amounts to manufacture, the assesee is required to pay duty on the transaction value and if the goods are cleared without manufacturing process the duty which required to be paid is equal to the Cenvat credit availed. Rule 16 also holds the duty paid goods as inputs therefore the Cenvat credit is admissible. As per various judgments also it can be seen that the Credit was regularized in case of wire drawing units as per the amendment made in Rule 16 of Central Excise Rules. Even in the absence of specific amendment in respect to the wire drawing unit, the credit was otherwise admissible as per unamended Rule 16 of Central Excise Rules, 2002. - Decided against the revenue

Issues Involved:

1. Whether the process of converting steel wire rods into Copper Coated CO2 Mig Welding Wires amounts to "manufacture."
2. Eligibility for Cenvat Credit on inputs used in the process.
3. Applicability of the Supreme Court judgment in Technoweld Industries.
4. Interpretation of Rule 16 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Whether the process of converting steel wire rods into Copper Coated CO2 Mig Welding Wires amounts to "manufacture":

The primary issue revolves around whether the activity of converting steel wire rods into Copper Coated CO2 Mig Welding Wires constitutes "manufacture" under Section 2(f) of the Central Excise Act. The Revenue argued that the process of drawing wire does not amount to manufacture, citing the Supreme Court judgment in Collector of Central Excise Vs. Technoweld Industries, which held that drawing wire from wire rods does not constitute manufacture. However, the Commissioner (Appeals) differentiated the case by emphasizing that the process involves not just drawing but also pickling, washing, copper coating, and buffing, which transforms the product into a welding wire, thus constituting manufacture.

2. Eligibility for Cenvat Credit on inputs used in the process:

The respondent availed Cenvat Credit on duty-paid wire rods used to manufacture Copper Coated CO2 Mig Welding Wires. The adjudicating authority initially denied this credit, aligning with the Technoweld judgment that drawing wire does not amount to manufacture. However, the Commissioner (Appeals) allowed the credit, reasoning that the entire process, including copper coating, amounts to manufacture, making the respondent eligible for Cenvat Credit. The Tribunal further supported this by referencing Rule 16 of the Central Excise Rules, 2002, which allows Cenvat Credit on duty-paid goods brought into the factory, irrespective of whether the subsequent process amounts to manufacture.

3. Applicability of the Supreme Court judgment in Technoweld Industries:

The Revenue heavily relied on the Technoweld Industries judgment, asserting that the drawing of wire does not amount to manufacture, thus disqualifying the respondent from availing Cenvat Credit. However, the Tribunal noted that the Technoweld judgment is applicable only when the process involves merely drawing wire without additional transformative processes. Since the respondent's process included significant additional steps like copper coating, the Tribunal found the Technoweld judgment inapplicable to the present case.

4. Interpretation of Rule 16 of the Central Excise Rules, 2002:

Rule 16 was pivotal in the Tribunal's decision. It states that goods brought into a factory for re-making, refining, or re-conditioning are eligible for Cenvat Credit as if they are inputs. The Tribunal highlighted that even if the process does not amount to manufacture, the duty paid on the inputs can still be credited. Various judgments, including Raajratna Metal Industries Ltd. Vs. Union of India and Commissioner Of C. Ex., Chandigarh Vs. North India Pre-Stressers, supported this interpretation, confirming that credit is admissible for duty-paid goods processed further in the factory, regardless of whether the process constitutes manufacture.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the Commissioner (Appeals) decision. It concluded that the respondent's process of converting steel wire rods into Copper Coated CO2 Mig Welding Wires amounts to manufacture, thus making them eligible for Cenvat Credit on the inputs used. The Tribunal emphasized that Rule 16 of the Central Excise Rules, 2002, supports the respondent's eligibility for Cenvat Credit, even if the process did not amount to manufacture. The appeal was dismissed, and the cross-objection was disposed of accordingly.

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