2005 (11) TMI 18 - AT - Central Excise

Central Excise - Refund - Respondent filed claim for refund of duty paid on wires on the ground that drawing of wires from wire rods, did not amount to manufacture - Not allowable

Summary

Issues:
1. Claim for refund of duty based on wire drawn from wire rods.
2. Eligibility for Modvat credit on inputs.
3. Appeal against the order allowing Cenvat credit.
4. Appeal against the order sanctioning cash refund.

Analysis:

Issue 1: Claim for refund of duty based on wire drawn from wire rods
The respondents filed a claim for refund of duty paid on wires drawn from wire rods. The original authority sanctioned cash refund of a portion of the amount and allowed the claimant to take Cenvat credit for the balance. However, the department contested the cash refund of the remaining amount, arguing that the product was not dutiable during the disputed period, making the claimant ineligible for Modvat credit on inputs. The appellate authority allowed the appeal, setting aside the cash refund. The judgment highlighted that if the final product was exempt from duty, no duty credit on inputs could be claimed, leading to the dismissal of the cash refund claim.

Issue 2: Eligibility for Modvat credit on inputs
The judgment emphasized that since the respondents only manufactured non-dutiable wires during the relevant period, they were not entitled to avail input-duty credit. It was clarified that even if a final product was excisable, no duty credit on inputs was permissible if the final product was exempt from duty. Therefore, the respondents were not permitted to pay any duty through debit in the Modvat account, and consequently, cash refund for any such duty paid was not claimable.

Issue 3: Appeal against the order allowing Cenvat credit
The department had filed an appeal against the original authority's decision to allow Cenvat credit to the assessee. This appeal was dismissed by the Commissioner (Appeals) in light of the earlier order that allowed the cash refund. With the setting aside of the cash refund order, the appeal against the Cenvat credit allowance was also allowed, emphasizing the interconnected nature of the decisions.

Issue 4: Appeal against the order sanctioning cash refund
Following the original authority's sanctioning of cash refund to the assessee, the department appealed this decision. However, the appellate authority dismissed the department's appeal, stating that the issue had already been decided in favor of the party. With the setting aside of the cash refund order, subsequent proceedings for cash refund were also nullified, resulting in the allowance of the appeal against the cash refund sanction.

The judgment was delivered on 28.11.2005, setting aside the orders related to cash refund and Cenvat credit, emphasizing the importance of duty exemption on final products in determining eligibility for duty credit and cash refunds.