2013 (7) TMI 212 - CGOVT - Central Excise

Rebate of duty paid on wire drawn - Amendment in Rule 16(1) of Central Excise Rules, 2002 Wire drawn from the wire rods - Vide Circular No. 720/36/2003, dated 29-5-2003, the Central Board of Excise and Customs clarified that the process of drawing wire from wire rods does not amount to manufacture As per the decision in the case of Technoweld Industries 2003 (3) TMI 123 - SUPREME COURT OF INDIA , the process of drawing wire from wire rod did not amount to manufacture. Held that - Retrospective amendment in Rule 16 is aimed at facilitating wire drawing units which had paid sum equal to the duty leviable on drawn wire after availing the credit of duty paid on inputs for the said period. It is aimed at regularizing availment of credits at two stages and payment of an amount representing duty at one stage. The purpose of the amendment is to regularize credit taken at the input stage (on wire-rod), credit taken by the downstream user of drawn wire and the amount paid as central excise duty on clearance of drawn wire - amendment made in Rule 16 ibid for the period 29-5-2003 to 8-7-2004 was aimed at facilitating wire drawing units for regularizing availment of Cenvat credits at two stages (i) at the input stage on wire rods (ii) second by the downstream user of drawn wire and the amount paid as Central Excise duty on clearance of drawn wire. Sum paid equal to duty leviable has been treated as duty and shall be allowed as credit to the buyer of drawn wire as per the said amendment. As per Rule 18 of Central Excise Rules, 2002 and Not. No. 19/2004-C.E. (N.T.), dated 6-9-2004, duty paid on exported goods is allowed to be rebated. amount paid is treated as payment of duty by virtue of retrospective amendment in Rule 16, the rebate of the said duty paid is admissible to the applicant. As per CCE, Chandigarh v. Punjab Lighting Aids Pvt. Ltd 2011 (6) TMI 221 - CESTAT, DELHI , amendment in Rule 16 is that units making wire from wire rod were to be treated as the assessee who had received the goods for being re-made, refined, re-conditioned or for any other reason under Rule 16(1) and thus he could take Cenvat credit of duty paid on wire rods and the amount paid as duty on the clearances of wires was to be treated as Central Excise duty. Therefore held that applicant is entitled to rebate of duty paid on exported goods in terms of Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004. Decided in favor of Assessee.

Summary

Issues Involved:
1. Applicability of Circular No. 720/36/2003 regarding the non-manufacturing status of drawing wire from wire rods.
2. Entitlement to Cenvat credit on inputs and capital goods.
3. Legality of rebate claims on exported goods under Rule 18 of Central Excise Rules, 2002.
4. Impact of retrospective amendment to Rule 16 of Central Excise Rules, 2002 by the Taxation Laws (Amendment) Act, 2006.
5. Jurisdiction and interpretation of the Commissioner (Appeals) regarding rebate claims.

Issue-Wise Detailed Analysis:

1. Applicability of Circular No. 720/36/2003:
The applicant, engaged in manufacturing stainless steel wires, contested the applicability of Circular No. 720/36/2003, which stated that drawing wire from wire rods does not amount to manufacture. The applicant argued that their process should be considered as manufacturing. The adjudicating authority upheld the circular, leading to the applicant continuing to avail Cenvat credit and claiming rebates on exported goods.

2. Entitlement to Cenvat Credit:
Despite the circular, the applicant continued to take Cenvat credit on inputs and capital goods. The department contended that since the final product was not excisable, the applicant was not entitled to Cenvat credit and its utilization for payment of duty on exported goods was without legal basis. The applicant's stance was supported by a stay order from the Gujarat High Court, allowing them to continue availing Cenvat credit and paying excise duty on the final products.

3. Legality of Rebate Claims:
The Commissioner (Appeals) initially sanctioned the rebate claims to the extent of Cenvat credit taken on wire rods, not the duty debited on exported goods. The applicant argued this was contrary to the Gujarat High Court's judgment and the amendment to Rule 16 by the Taxation Laws (Amendment) Act, 2006, which allowed full rebate claims. The applicant maintained that the rebate should be for the actual duty paid on exported goods, not limited to the Cenvat credit on inputs.

4. Retrospective Amendment to Rule 16:
The retrospective amendment to Rule 16 by the Taxation Laws (Amendment) Act, 2006, was crucial. It declared wire drawing units as assessees eligible for Cenvat credit on inputs and allowed the sum paid as duty to be treated as duty, facilitating the regularization of credits and duties paid during the specified period (29-5-2003 to 8-7-2004). The amendment aimed to resolve issues arising from the Supreme Court's judgment in Technoweld Industries, which held that wire drawing did not constitute manufacturing.

5. Jurisdiction and Interpretation of Commissioner (Appeals):
The Commissioner (Appeals) restricted the rebate claims to the extent of Cenvat credit on wire rods, which the applicant contested as illegal and contrary to the Gujarat High Court's directions. The applicant argued that Rule 18 of the Central Excise Rules, 2002, and the related notification allowed for a rebate of duty paid on exported goods without such restrictions. The Government noted that the Commissioner (Appeals) did not consider the clarifications in the C.B.E. & C. Circular dated 26-7-2006, which supported the applicant's case for full rebate claims.

Conclusion:
The Government concluded that the applicant was entitled to a rebate of duty paid on exported goods in terms of Rule 18 of the Central Excise Rules, 2002, read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004. The retrospective amendment and the Gujarat High Court's judgment supported the applicant's entitlement to full rebate claims. The impugned orders-in-appeal were modified to reflect this entitlement, and the revision applications succeeded accordingly.