Custom, Excise & Service Tax Tribunal
M/S Bedmutha Wire Company Ltd vs Commissioner Of Central Excise, Nashik on 2 November, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. E/2021 to 2023/05 (Arising out of Order-in-Original No. 10/CEX/2005 dated 17.3.2005 passed by the Commissioner of Central Excise, Nashik). For approval and signature: Honble Shri M.V. Ravindran, Member (Judicial) Honble Shri C.J. Mathew, Member (Technical) ======================================================
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 : Yes 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? ====================================================== M/s Bedmutha Wire Company Ltd. Appellant Vs. Commissioner of Central Excise, Nashik Respondent Appearance: Shri M.H. Patil, Advocate for Appellant Shri Ajay Kumar, Jt. Commissioner (AR) for Respondent CORAM: SHRI M.V. RAVINDRAN, MEMBER (JUDICIAL) SHRI C.J. MATHEW, MEMBER (TECHNICAL) Date of Hearing: 02.11.2015 Date of Decision: 02.11.2015 ORDER NO. Per: M.V. Ravindran
These three appeals are taken up for disposal by a common order as they are interlinked with each other.
2. The relevant facts that arise for consideration are that during the period Sept, 02 to March, 04, the appellant herein availed CENVAT Credit on the various inputs like, Acid, Zink Chloride, Wire Rods, Zinc, Lead etc. The appellant herein is engaged in drawing of MS Wires falling under Chapter 7217.90. Revenue authorities were of the view that during the material period, the activity of drawing the wires from the rods and wires does not amount to manufacture and hence the CENVAT Credit availed by the appellant seems to be incorrect. Accordingly, a show-cause notice was issued seeking to reverse such CENVAT Credit availed. The adjudicating authority after following the due process of law confirmed the demands raised along with interest and also imposed penalties.
3. Learned Counsel appearing on behalf of the appellant would submit that Central Government of India by the Taxation Laws (Amendment) Rules, 2005 by retrospective amendment regularized the credit taken at the input stage (on wire rod) and credit taken by downstream user as also one who draws the wire was sought to be regularized. He would submit that the said Bill was passed by the Parliament and subsequently CBE&C vide Circular No. 831/8/2006-CX dated 26.7.2006 clarified the issue further. He would submit that the matter is now decided by the Tribunal relying upon the very same Circular in the case of K.E.I. India 2008 (222) ELT 555 (T).
4. The learned AR reiterates the findings of the lower authorities.
5. On perusal of the records, we find that the issue involved in this case is regarding the ineligible CENVAT Credit availed on MS wire rods and various chemicals which were utilized by the appellant for drawing the wire during period Sept, 02 to March, 04. It is the case of the Revenue that after the judgment of the Apex Court in the case of Technoweld Industries 2003 (155) ELT 209 (SC), the mere drawl of wire from wire rods does not amount to manufacture. Accordingly, CENVAT Credit availed during the period wherein the activity undertaken by the appellant will not get covered as the activity get manufactured, CENVAT Credit was correctly sought to be reversed.
6. In our considered view, the case of the Revenue is incorrect inasmuch as during the relevant period the issue was adjudicated before the various forums. Legislature has passed the Taxation Laws (amendment) Rules, 2005 wherein retrospective amendment was introduced to settle this kind of situation. The CBEC vide its Circular dated 26.7.2006 has clarified the issue in respect of the amendment made by the Act. We reproduce the entire circular: -
F.No.201/51/2004-CX-6 Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs 26th July, 2006.
Subject: - The Taxation Laws (Amendment) Act, 2006.
1. The Taxation Laws (Amendment) Act, 2006 has come into effect from 13.07.2006. Certain amendments / insertions to section 11A, section11DDA, section 35E, section 37E of the Central Excise Act, 1944 and rule 16 of the Central Excise Rules, 2002 have been effected.
2. Section 11A of the Central Excise Act, 1944 has been amended to introduce an optional scheme for enabling voluntary payment of duty by assessees, in full or in part, in cases involving fraud, mis-statement etc. along with interest and 25% of the duty amount as penalty within 30 days of the receipt of the show cause notice thereby dispensing with the rigours of adjudication procedure. This is an additional facility given to the Trade to settle the dispute at an early stage to reduce litigation and also aid in collection of tax dues more expeditiously. The scheme is optional and not compulsory. The assessee has the further option of using the proposed facility in full or in part. In case of part payment, the remaining amount will be subject to regular proceedings as per the law.
3. Section 35E the Central Excise Act, 1944, authorizes a Commissioner of Central Excise to review the orders passed by an adjudicating authority subordinate to him and direct filing an appeal before the appellate authority. While sub-section (4) of the said Section speaks of filing such an appeal by adjudicating authority or the authorized officer, the erstwhile sub-section (2) only referred to the adjudicating authority and omitted reference of "the authorized officer". This lacuna has generated disputes and has attracted different interpretations by the Tribunal and the courts. Hence a corrective measure has been taken to amend section 35E (2) to authorize an authority other than an adjudicating authority to file appeals on behalf of the Commissioner.
4.1 Rule 16 of the Central Excise Rules, 2002 has been retrospectively amended to declare "wire drawing units" as assessees for the period 29.05.2003 to 08.07.2004, hereinafter referred to as the said period.
4.2 The process of drawing of wire from "wire rod" was held as not amounting to 'manufacture' by the Supreme Court in the case of M/s Technoweld Industries [2003-(155)-ELT-0209-SC]. Therefore, the benefit of availment of credit of duty on inputs by the "wire drawing units" was withdrawn on 29.5.2003 by a circular issued by the Board. However, certain wire drawing units continued to pay a sum representing duty, and continued to pass on the credit of amount paid as duty to the ultimate buyer of drawn wire for further manufacture. By an amendment in the Budget 2004, Note 10 was inserted in Section XV of the Central Excise Tariff Act, 1985 to declare the said process as amounting to 'manufacture'. However, as the said Section Note was effective from 9.7.2004, it did not resolve the problem for the said period.
4.3 Accordingly, Show Cause Notices were issued to wire drawing units for recovery of Cenvat Credit availed on inputs on the grounds that the process of wire drawing did not amount to manufacture for the said period. Show Cause Notices were also issued to the downstream buyers of "drawn wires" who availed Cenvat Credit of amount paid as duty on drawn wire, on the ground that the sum paid on clearance of "drawn wire" by wire drawing unit did not represent central excise duty. Such wire drawing units could also not claim the refund of amount paid as duty on drawn wire, on the ground of unjust enrichment. In this regard, Board's letter dated 3rd January 2005 issued vide F. No. 139/3/2004-CX.4 may also be referred to.
4.4 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 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 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.
4.5 As the Taxation Laws (Amendment) Bill had been introduced in Parliament, Board had, vide a letter dated 20th July 2005, directed all field officers to keep all such cases in call book till the passage of Taxation Laws (Amendment) Bill. Now that the Bill has been passed, you are directed to take out all such cases from call book and decide them by 15th August 2006. A compliance report in this regard may be sent to the Board by 31st August 2006.
5. Two new sections namely, section 11DDA and section 37E have been incorporated in the Central Excise Act, 1944. Detailed instructions regarding these instructions shall be issued in due course. It can be seen from the above reproduced Circular that in para 4.4 the Board has specifically stated that the amendment has regularized the credit taken at the input stage (wire rods) and the credit taken by the downstream user who draws the wire. In our view as per the Boards Circular, the demands raised on the appellant herein is incorrect and the impugned order needs to be set aside and we do so. It is seen that Tribunal in the case of K.E.I. India (supra) has taken the same view following CBEC Circular.
7. The impugned order is held as unsustainable and is set aside. The appeal is allowed with consequential relief, if any.
(Pronounced in Court)
(C.J. Mathew) (M.V. Ravindran)
Member (Technical) Member (Judicial)
Sinha
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Appeal No. E/2021-2023/05