2007 (11) TMI 165 - AT - Central Excise

Credit on wire rods used for drawing of wire credit denied holding that impugned process is not a manufacture - Circular No. 831/8/2006 made retrospective amendment in Rule16 - purpose of the amendment is to regularize credit taken at the input stage (on wire rod) - wire drawing units, which had paid a sum equal to duty leviable on drawn wire, would be eligible to avail the credit of duty paid on inputs and utilize the same for payment of duty on drawn wire hence credit allowed

Summary

Issues: Disallowance of credit on wire rods as input under Cenvat Credit Rules due to use in wire drawing process not considered as manufacturing process.

In this case, the adjudicating authority disallowed the credit on wire rods, deeming them ineligible as inputs under the Cenvat Credit Rules because they were used for wire drawing, which was not classified as a manufacturing process under the Central Excise Act. The Commissioner (Appeals) overturned the adjudication order. The Revenue appealed against this decision, arguing that a Board Circular supported their position. The circular clarified that the retrospective amendment in Rule 16 aimed to regularize credit taken at the input stage for wire rods, credit taken by downstream users of drawn wire, and the duty paid on clearance of drawn wire. As the case fell within the period covered by the circular, the Tribunal found no grounds to interfere with the Commissioner's decision. Consequently, the Revenue's appeal was rejected.

The judgment highlights the interpretation and application of the Cenvat Credit Rules concerning the classification of inputs used in specific processes under the Central Excise Act. It also underscores the significance of relevant Board Circulars in guiding decisions related to credit eligibility and retrospective amendments. The Tribunal's analysis focused on aligning the case facts with the provisions outlined in the circular to determine the admissibility of credit on wire rods utilized in wire drawing activities. Ultimately, the decision rested on the temporal relevance of the circular to the period in question, leading to the rejection of the Revenue's appeal based on the circular's supportive stance towards the assessee's position.