Customs, Excise and Gold Tribunal - Tamil Nadu
Suprajith Engineering Inds. And Anr. vs Cce on 7 April, 2005
ORDER S.L. Peeran, Member (J)
1. The stay and appeal in both the appeals are common and they are taken up for final disposal granting waiver of pre-deposit and staying it's recovery. The appellants are engaged in the activity of drawing wires falling under various chapter headings of Chapter 72 from wire rods received from outside. The modvat credit has been denied solely on the ground that the activity of drawing wires from wire rods does not amount to the process of manufacture. The Tribunal had examined this very issue in the case of Stumpp Scheule and Somappa Ltd., and SKF India Ltd v. CCE Bangalore (Final Order No 431-432/2005 dt 17.3.2005) and decided the same favour of the party. The same view was expressed by Delhi bench in the case of Shree Krishna Industries and M/s Bajrang Wire Products (India) Pvt. Ltd., vide Final Order No. 34-35/2005 dated 30.12.2004. The findings recorded in the case of Stumpp Scheule and Somappa Ltd. are extracted herein below.
The stay application was heard on 17.1.2005. The stay application was allowed granting interim stay and with a direction that the appeal would be heard today, in view of the issue having been decided by the Tribunal in the case, of Eveready Industries India Ltd. v. CCE 2000 (120) ELT 397 and in MDS Switchgear v. CCE . The issue is common in the case of M/s. SKF India Limited also and hence both the appeals are taken up together for disposal as per law. The appellant M/s. Stumpp Scheule and Somappa Ltd. were removing excisable goods viz. Used Metallic Springs falling under Chapter sub heading 7320.00, but they were availing CENVAT credit on the inputs viz. Wires of Non-Alloy Steel and Alloy Steel covered under CSH 7217.90 and 7229.90 CET Act, 1985 and were utilizing the same towards the payment of duty on their final products. The period involved is 29.5.2003 to 31.3.2004. The Revenue has proceeded to recover the CENVAT credit availed by them on the allegation that they had wrongly availed the same. In view of the fact that Wires of Non-Alloy Steel drawn from wire rods does not amount to a process of manufacture as held by the Apex Court in the case of (i) M/s. Vishvaman Industries; (ii) Hind Enterprises and (iii) M/s. Technoweld Industries the Board also withdrew the Circulars issued in this context. Therefore, it was contended by the Revenue that as drawing of wires did not amount to manufacture, the availing of CENVAT credit on duty paid wires is not as per law.
2. In the case of M/s. SKF India Ltd, it is alleged that the appellants were engaged in the manufacture of Ball Bearings, Roller Assembly, etc. falling under Chapter 87 of CET, 1985. They had received wires drawn from wire drawing units and had taken the Credit of CE duty paid on such wires and utilized the same towards payment of duty on their final products viz. Ball Bearings, Roller Assembly, etc. during the period from 1.6.2003 to 31.12.2003. On the same allegation as made in M/s. Stumpp Scheule and Somappa Ltd., the department initiated proceedings to deny the Modvat credit as availed by the assessee.
2. We have heard the learned Counsels Shri V. Raghuraman and Shri K.S. Ravi Shankar for the appellants and Shri L. Narasimha Murthy, the learned SDR for the respondents.
3. The Counsels submitted that the issue is no longer res Integra and the Tribunal had already categorically laid down that not withstanding the fact that drawing of wires does not amount to a process of manufacture, yet they are entitled to avail the modvat credit. In this regard, a large number of judgments had been filed. It is also submitted that the issue is restricted only to the period in question and now the dispute has been settled as there are amendments brought into rules for grant of Modvat credit.
4. The learned SDR filed comments from the department and reiterated the departmental view.
5. For the purpose of disposal of these appeals, it is sufficient to refer to one judgment on this point by the Delhi Bench of CESTAT in the case of CCE Indore v. M.P. Telelinks Ltd. 2004 (178) ELT 167 (Tri-Del.). It has been held by the Tribunal that 'if the department levies and collects Central Excise Duty on the goods cleared from the factory, they cannot claim for the purpose of allowing the CENVAT credit that the process of manufacture had not taken place.' It has been further held that 'if the process of manufacture had not taken place, the question of duty would not arise,' On this very issue of availing Modvat credit on the inputs on which no process has taken place amounting to manufacture, the Tribunal has held that credit has been utilized in removing the inputs as such under provisions of Rule 57AB(1C) of the Act. It is held that after knowing all the points that in whatever manner the issued is looked into, it is completely Revenue neutral and, therefore, the Revenue appeal on this point was rejected. We are of the considered opinion that there is no illegality in the appellants utilizing modvat credit solely on the ground that drawing of wire from wire rods did not amount to a process of manufacture, while utilizing the credit for the manufacture of final product in each of the noted case. The order passed by both the authoritiesis not as per law and in terms of several judgments cited before us more particularly in the above cited judgment. The impugned orders are set aside and the appeals are allowed with consequential relief if any.
6. The findings recorded in the Shree Krishna Industries para 6 is reproduced herein below.
We have considered the submissions of both the sides. Both the Appellants are drawing wire from wire rids, the activity which has been held not amounting to manufacture by the Supreme Court in the case of CCE v. Techno Weld Industries . It has been held by the Supreme Court that initially the product was wire rod and ultimate product is also wire and "all that is done is that the gauge of the rod is made thinner and the product is finished little better.... There is no manufacture of a new product." Thus in view of the judgment of the Supreme Court both the Appellants are not manufacturer and not liable to pay Central Excise duty of wires drawn out of wire rods. The provisions of Section 11D are applicable to only those persons who are liable to pay duty under the Central Excise Act or the Rules made thereunder. Other requirements mentioned in Section 11D is that the persons who have collected an amount in excess of the duty assessed or determined and paid on any excisable goods under the Act or the Rules, from the buyers representing in any manner duty of excise are required to pay the said amount to the credit of the Central Government. Both the requirements for attracting the provisions of Section 11D are not satisfied in case of both the Appellants. Firstly they are not liable to pay duty under the Central Excise Act as the process undertaken by them does not amount to manufacture and the duty under the Central Excise Act is levied only on the activity of manufacture. Once they are not liable to pay duty, the question of satisfying requirement of Section 11D does not rise as it cannot be said that they have collected any amount in excess of the duty assessed and paid. This was also the view expressed by this Tribunal in the case of Bharat Petroleum Corporation Ltd (supra) where the provisions of Section 11D were sought to be invoked against the registered dealer of goods. The Tribunal has held that even prior to amendment of the expression "every person" in Sub-section (1) of Section 11D, the Andhra Pradesh High Court has relied on the said expression as "the manufacturer/producer." The Tribunal further observed that this view has been expressed by the statutory amendment under Section 103 of the Finance Act 2002 with retrospective effect from 20.9.1991. The Tribunal, therefore hold that no demand can be raised against the Appellants who is a registered dealer under Section 11D as it is not the manufacturer of the concerned goods. Thus provisions of Section 11D are not attracted in the present matters. Accordingly both the appeals are allowed to this extent.
7. As the issue is decided in both the noted citations and the findings thereof are clearly applicable to the facts of this case, hence following the ratio of the same, the impugned orders are set aside and appeals allowed with consequential relief if any.
(Operative portion of the order already pronounced in open Court on conclusion of the hearing)