Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S. Klin Weld Wires Pvt. Ltd on 28 January, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.
Appeal No. E/1431/2005
E/CO-371/2005
(Arising out of Order-in-Appeal No. AT/RGD/35/2005 dt. 31.01.2005 passed by the Commissioner of Central Excise (Appeals) Mumbai-III)
For approval and signature:
Honble Shri Ramesh Nair, Member (Judicial)
Honble Shri Raju, Member (Technical)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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Commissioner of Central Excise, Customs & Service Tax, Raigad
:
Appellant
VS
M/s. Klin Weld Wires Pvt. Ltd.
:
Respondent
Appearance
Shri Sanjay Hasija Supdt. (A.R.) for Appellant
Shri R.V. Shetty, Advocate for respondent
CORAM:
Honble Shri Ramesh Nair, Member (Judicial)
Honble Shri Raju, Member (Technical)
Date of hearing : 28/01/2016
Date of decision : 28/01/2016
ORDER NO.
Per : Ramesh Nair
The appeal of the Revenue is directed against Order-in-Appeal No. AT/RGD/35/2005 dt. 31.01.2005 passed by the Commissioner of Central Excise (Appeals) Mumbai-III, whereby Ld. Commissioner (Appeals) set aside the Order-in-Original and allowed the appeal filed by the appellant.
2. The fact of the case is that the respondent is engaged in the manufacture of Copper Coating CO2 Mig Welding Wire of Steel out of the duty paid alloy steel wire rods. The process involved is the steel wire rod falling under Chapter 7227.90 and 7228.30 is drawn in steel wire. Then this redrawn wire is further copper coated and wound in spools and sold as Copper Coated CO2 Mig Welding Wire, which is normally used as welding electrode in wire form. The respondent availed Cenvat Credit on duty paid wire rods and clears the welding wire on payment of duty. The department has initiated the action and contended that the activity of conversion of steel wire rod into Copper Coated CO2 Mig Welding Wires involves the process of drawing of wire. The drawing of wire does not amount to manufacture in the light of Honble Supreme Court judgment in the case of Collector of Central Excise Vs. Technoweld Industries 2003 (155) ELT 209 (S.C.). The adjudicating authority held that no Cenvat Credit is admissible on input namely wire rod as the process of conversion of wire rod into Copper Coated CO2 Mig Welding Wires is not to be considered as process of manufacture. Aggrieved by the adjudication order dt. 20.2.2004, the appellant filed appeal before the Commissioner (Appeals). The Ld. Commissioner (Appeals) while allowing the appeal held that the activity of the respondent is conversion of wire rod into Copper Coated CO2 Mig Welding Wire, which not only involved the process of drawing of the wire but it also involves the process of copper coating. He further held that Honble Supreme Court judgment in the case of Technoweld Industries Ltd. (supra) is applicable only if the appellants are selling/clearing the thinner gauge wire i.e. plain steel wire whereas the fact remains after drawing of wire it involves the process of pickling/washing/copper coating and buffing in a separate heated copper coating machine and ultimately rewinding. In view of this process the activity carried out by the present assessee amounts to manufacture under Section 2(f) of the Act. Therefore, the respondent is eligible for Cenvat Credit on the input such as wire rod. Aggrieved by the first appellate order, the Revenue has filed this appeal on the ground that the Supreme Court judgment in the case of Technoweld Industries Ltd. (supra) directly applies in the present case as the main activity involve is the process of drawing wires from wire rod which does not amount to manufacture consequently the respondent will not be eligible for Cenvat Credit.
3. Shri Sanjay Hasija. Ld. Supdt. (A.R.) appearing on behalf of the Revenue reiterating the grounds of appeal submits that it is a settled law that the drawing of wire from wire rod does not amount to manufacture. Therefore the respondent is not eligible for Cenvat Credit on the input used in the non-manufacturing process. He placed reliance on the following judgments:
(i) Collector of Central Excise Vs. Technoweld Industries 2003 (155) E.L.T. 209 (S.C.)
(ii) Collector of C. Ex., Bombay Vs. Special Steel Ltd.
1996 (88) E.L.T. 707 (Tribunal)
(iii) Commissioner of Central Excise, Mumbai Vs. Advani Oerlikon Ltd.
2004 (163) E.L.T.171 (Tri.-Mumbai)
(iv) Advani-Oerlikon Ltd.& Another Vs.Union of India and Another 1981 (8) E..T. 432(Bom.)
(v) Collector of C. Ex., Patna Vs. Usha Martin Industries Ltd.
1999 (018)E.L.T. 517 (Tribunal)
(vi) Special Steel Ltd. Vs. Collector of Central Excise, Bombay 1992 (38) E.C.R. 152 (Cegat SB-BI)
(vii) Union of India Vs. HUF 1978 E.L.T. (J 389)
(viii) Bothra Metal Industries Vs. Collector of C.Ex. Vadodara 1998 (99) E.L.T. 120 (Tribunal)
(ix) Tega India Ltd. Vs. Commr. of C. Ex., Calcutta-II 2004 (164) E.L.T. 390 (S.C.)
(x) Commr. of C.Ex., Surat-II Vs. P.S.L. Corrosion Control Ltd.
2003 (151) E.L.T. 439(Tri.-Del.)
(xi) Commr. of C. Ex., Belapur Vs. UPM Kymmene India Pvt. Ltd.
2015-TIOL-1172-CESTAT-MUM
4. On the other hand, Shri R.V. Shetty Ld. Counsel for the respondent submits that the process involved is not only drawing of wire but it involves pickling of wire annealing and copper coating. The resultant product is welding wire therefore it is not a case of only drawing of wire from wire rod, but it involves the manufacturing of welding electrode in wire form from the steel wire rod. Therefore the judgment of Honble Supreme Court in the case of Technoweld Industries (supra) does not apply in the facts of the present case. He further submits that in the whole proceeding the case of the Revenue is since the activity does not amount to manufacture the respondent is not entitled for Cenvat Credit. He submits that even if it is presumed that Cenvat Credit is not admissible but since the respondent has cleared the processed goods on payment of duty. The Cenvat credit availed stand paid back in the form of excise duty on the clearance of Copper Coated CO2 Mig Welding Wire, for this reason also there is no reason to deny the Cenvat Credit.
5. We have carefully considered the submissions made by both the sides. We find that even without going into the aspect of manufacturing if it is presumed that the activity does not amount to manufacture the Cenvat Credit is admissible in terms of Rule 16 of the Central Excise Rules, 2002 which is reproduced below:
Rule 16. Credit of duty on goods brought to the factory. -
(1) Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be entitled to take CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002 and utilise this credit according to the said rules.
(2) If the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken under sub-rule (1) and in any other case the manufacturer shall pay duty on goods received under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be.
Explanation. - The amount paid under this sub-rule shall be allowed as CENVAT credit as if it was a duty paid by the manufacturer who removes the goods.
(3) If there is any difficulty in following the provisions of sub-rule (1) and sub-rule (2), the assessee may receive the goods for being re-made, refined, re-conditioned or for any other reason and may remove the goods subsequently subject to such conditions as may be specified by the Commissioner.
From the above rule, 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.
This issue has been settled in the following judgments:
(i) Raajratna Metal Industries Ltd. Vs. Union of India 2013 (294) E.L.T. 192 (Guj.) held that-
13.?In the background of the aforesaid facts as well as the submissions advanced by the learned advocates for the respective parties, it is apparent that the impugned order passed by the Commissioner (Appeals) is based upon the decision of the Supreme Court in the case of Commissioner of Central Excise v. Technoweld Industries (supra), holding that the process of drawing wires does not amount to manufacture.
14.?Sub-section (1) of Section 39 of the Taxation Laws (Amendment) Act, 2006, as is relevant for the present, reads thus :
39. (1) In the Central Excise Rules, 2002, made by the Central Government in exercise of the powers conferred by section 37 of the Central Excise Act, rule 16 thereof as published in the Official Gazette vide notification of the Government of India in the Ministry of Finance (Department of Revenue), No. G.S.R. 143(E), dated the 1st March 2002 shall stand amended and shall be deemed to have been amended retrospectively in the manner as specified in column (2) of the Schedule for the period specified in column (3) of that Schedule against the rule specified in column (1) of that Schedule.
(2)?Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, any action taken or anything done or purported to have been taken or done, at any time during the period commencing on and from the 29th day of May, 2003 and ending with the 8th day of July, 2004 under the rule as amended by sub-section (1), shall be deemed to be and always to have been, for all the purposes, as validly and effectively taken or done as if the amendment made by subsection (1) had been in force at all material times.
(3)?For the purposes of sub-section (1), the Central Government shall have and shall be deemed to have the power to make rules with retrospective effect as if the Central Government had the power to make rules under section 37 of the Central Excise Act, retrospectively, at all material times.
Explanation. - For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence, which would not have been so punishable if this section had not come into force.
15.?By virtue of the aforesaid provisions, Rule 16 of the Rules has been amended retrospectively in the manner as specified in column (2) of the Schedule for the period specified in column (3) of that Schedule against the rule specified in column (1) of that Schedule. Sub-section (2) of section 39 says that notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, any action taken or anything done or purported to have been taken or done, at any time during the period commencing on and from the 29th day of May, 2003 and ending with the 8th day of July, 2004 under the rule as amended by sub-section (1), shall be deemed to be and always to have been, for all the purposes, as validly and effectively taken or done as if the amendment made by sub-section (1) had been in force at all material times.
16.?The Schedule thereto indicates that Rule 16 of the Central Excise Rules has been amended by inserting the second proviso thereto, which reads thus :
Provided that for the purposes of this rule, assessee shall include wire drawing unit, which has cleared the goods on payment of an amount equal to the duty at the rate applicable to drawn wire on the date of removal and on the value determined under relevant provisions of the Act and the rules made thereunder.
Provided further that the amount paid under the first proviso shall be allowed as CENVAT credit as if it was duty paid by the assessee who removes the goods.
17.?Thus, the persons like the petitioners are termed to be assessee within the meaning of Rule 16 of the Rules. Rule 16 of the Rules lays down that where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be entitled to take Cenvat credit of the duty paid as if such goods are received as inputs under the Cenvat Credit Rules, 2002 and utilize this credit according to the Rules. By virtue of the amendment, the petitioner is an assessee within the meaning of Rule 16 of the Rules and as such, would be entitled to avail of Cenvat credit in accordance with the Rules.
18.?Examining the facts of the present case in the light of the aforesaid amendment in the statutory provisions, the impugned order dated 8-6-2005 passed by the Commissioner (Appeals) as well as the orders in-original dated 20-12-2004 passed by the adjudicating authority are clearly contrary to the statutory provisions and as such, cannot be sustained.
19.?For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned order-in-appeal No. 376 to 377/2005, dated 8-6-2005, (Annexure I to the petition) and the orders-in-original No. 947/Ref/2004 and No. 948/Ref/2004 both dated 20-12-2005 passed by the Commissioner of Central Excise, Ahmedabad (Annexure G to the petition collectively), are hereby quashed and set aside. Consequently, the refund claims of the petitioners shall stand restored to the file of the adjudicating authority, who shall decide the same afresh in the light of the aforesaid amended statutory provisions.
(ii) Commissioner Of C. Ex., Chandigarh Vs. North India Pre-Stressers 2013 (290) E.L.T. 680 (Tri. - Del.) held that-
2. After hearing? both the sides, we notice that the Government of India has enacted the Taxation Laws (Amendment) Act, 2006 with effect from 13-7-2006 to give legal backing to excise duty paid by wire drawing units on wires drawn from wire rods during the period 29-5-2003 to 8-7-2004 and has issued Circular No. 831/18/2006-CX., dated 26-7-2006 advising that all demands of the nature being dealt with in this Appeal should be decided, considering the retrospective legislation made by the Government.
3.We have gone? through the said retrospective legislation and the circular dated 26-7-2006 issued by C.B.E. & C. and we find that the demand confirmed by the Adjudicating Authority against Respondents in this case cannot survive in view of the said retrospective amendment. Therefore, the Appeal filed by Revenue is rejected.
(iii) Commissioner Of C. Ex., Chandigarh Vs. Punjab Lighting Aids P. Ltd. 2012 (279) E.L.T. 143 (Tri. - Del.) held that-
7.?In this case, wires had been received by the respondent during the period from August, 2003 to 8-7-04, i.e., during the period for which the 1st and 2nd provisos had been added to sub-rule (3) to Rule 16. Therefore, the amount paid by the manufacture-suppliers of wire on the clearance of wire has to be treated as duty and respondent who had received the wire would be eligible for its Cenvat credit. The only aspect which has to be checked in as to whether the wire manufacturers had obtained refund of the duty paid by them on the wire and in case they have taken the refund, the respondent would not be eligible for Cenvat credit. For this purpose, the matter has to be remanded to the original adjudicating authority.
8.?In view of the above, discussion, the impugned order is set aside and the matter is remanded to the original adjudicating authority for de novo adjudication in the light of observation in paras 6 & 7 above. The Revenues appeal stands disposed of as above.
(iv) Venus Wire Industries Pvt. Ltd. Versus Commr. Of C. Ex., Raigad2008 (224) E.L.T. 495 (Tri. - Mumbai) held that-
5.?On perusal of the record we find that the Board Circular dated 26-7-2006 gave the clarification on the retrospective amendments to Rule 16. We may read the specific paragraph :-
The retrospective amendment in Rule 16 is aimed at facilitating wire drawing units, which had paid a 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. In other words, wire drawing units, which had paid 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 for the period of amendment. The sum paid by the wire drawing unit in such cases will be treated as duty and shall be allowed as credit to the buyer of drawn wire in terms of the amendment. This amendment would not create any additional liability on any wire drawing unit which did not pay duty on drawn wire during the period of amendment.
6.?It can be seen from the above reproduced portion of the Circular that the Board categorically clarified that the retrospective amendment is aimed at regularizing availment of credits at two stages. As such, the appellants case is squarely covered by the Taxation of Laws (Amendment) Act, 2006 and Boards Circular dated 26-7-2006. Accordingly, the impugned order is liable to be set aside and we do so. The appeal is allowed.
(v) K.E.I. India Versus Commissioner Of Central Excise, Jaipur-I 2008 (222) E.L.T. 555 (Tri. - Del.) held that-
5.In the light of the amendments to? the Central Excise Act and the Modvat Rules and in the light of the Boards clarification cited above, we set aside the orders of the Commissioner and allow the appeals with consequential relief. Miscellaneous application is also disposed of. From the above judgments 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. We are also of the view that 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. As per the above discussion and case laws, we are of the considered view that the respondent was entitled for the Cenvat Credit. The Revenues appeal is dismissed. Cross-objection also stands disposed of.
(Pronounced in court ) (Raju) Member (Technical) (Ramesh Nair) Member (Judicial) SM.
12E/1431/2005 E/CO-371/2005