2016 (12) TMI 86 - AT - Central Excise

Manufacture - pickling and annealing - demand of the ineligible cenvat credit availed and also for the refund of the rebates already sanctioned - Held that - it is undisputed that annealed and pickled stainless steel wire rods were exported on payment of duty under rebate. The exports under rebate are always under the physical control or the approval of the jurisdictional range officers, and the range officers should have objected to such clearances sought to be done by the appellant - it is the avowed principle of the Government of India that when the goods are for export, no taxes/duties need to be included in the value. This avowed principle of the Government of India will go for a toss if the appellant herein is not granted the benefit of cenvat credit on the inputs which he has procured on payment of duty and after undertaking the process of pickling and annealing, exported the goods. In the case of Finolex Cables Ltd. 2006 (11) TMI 62 - CESTAT, MUMBAI , this Tribunal has categorically held that the assessee cannot be prevented from availing benefits available to the merchant exporter for the exports merely because he happens to be a manufacturer. In that case, the petitioner/appellant therein was a manufacturer and had exported the excess of procured raw material to overseas buyers under bond or under claim of rebate which was sought to be denied by the jurisdictional authorities. Credit allowed - appeal allowed - decided in favor of appellant-assessee.

Issues Involved:
- Availment of cenvat credit on hot rolled stainless steel wire rods used for pickling and annealing.
- Whether pickling and annealing amount to manufacture under Central Excise Act, 1944.
- Validity of demand for ineligible cenvat credit and refund of rebates.
- Applicability of Rule 6(1) and Rule 3(4) of the Cenvat Credit Rules, 2002.
- Interpretation of conditions for availing modvat/cenvat credit.
- Compliance with duty payment on inputs and final product levy.
- Impact of exportation on cenvat credit eligibility.
- Comparison with precedent cases of Finolex Cables Ltd., Glass & Ceramics Ltd., and Lamicoat International Pvt. Ltd.
- Government policy on tax/duty exclusion for exported goods.
- Consideration of export rebate and physical control by range officers.

Analysis:

1. The case involved a dispute regarding the availment of cenvat credit on hot rolled stainless steel wire rods used for pickling and annealing, leading to the export of stainless steel wire rods under rebate. The lower authorities contended that pickling and annealing did not constitute manufacturing under the Central Excise Act, 1944, thus challenging the cenvat credit availed by the appellant.

2. The appellant argued that the process of pickling and annealing should be considered as manufacturing, enabling them to claim cenvat credit and export the goods under rebate. Reference was made to Rule 3(4) of the Cenvat Credit Rules, 2002, allowing clearance of inputs on payment of duty equal to credit availed for export purposes. Precedent cases like Finolex Cables Ltd. were cited to support the appellant's position on cenvat credit eligibility post-exportation.

3. The departmental representative emphasized the necessity for the manufacturer to pay duty on inputs used in the manufacturing process and levy of excise duty on the final product to avail modvat/cenvat credit. The application of the Supreme Court judgment in KCP Ltd. vs. CCE, Chennai was mentioned to support the contention that absence of a manufacturing process could invalidate cenvat credit claims.

4. The Tribunal examined the submissions and records, noting the undisputed procurement of stainless steel wire rods with cenvat credit, followed by pickling and annealing before exportation under rebate. The Tribunal found the lower authority's order to be incorrect for multiple reasons.

5. Firstly, the Tribunal highlighted the physical control exercised during exports under rebate, suggesting that range officers should have intervened if any irregularities were present. Secondly, the Tribunal emphasized the government's policy of excluding taxes/duties on exported goods, indicating the importance of granting cenvat credit to encourage exports.

6. The Tribunal referenced the Finolex Cables Ltd. case to reinforce the appellant's right to claim benefits available to exporters, irrespective of their manufacturing status. The Tribunal's decision favored the appellant, setting aside the lower authority's order and allowing the appeal with consequential relief, based on established legal principles and precedents.

This comprehensive analysis outlines the key legal issues, arguments presented, and the Tribunal's decision, providing a detailed understanding of the judgment's significance and implications in the context of cenvat credit and export-related disputes.

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