Cenvat credit on statutorily treated duty upheld where wire drawing activity was recognised as manufacture.

Statutory treatment of the amount paid by a wire drawing unit as duty, after the Taxation Laws (Amendment) Act, 2006 recognised the activity as manufacture, supported Cenvat credit in the hands of the recipient manufacturer. The Tribunal held that once the payment was regarded as duty, credit could not be denied merely because the assessee had taken credit on that duty payment. The disallowance of credit and the penalty were held unsustainable, and the impugned order was set aside.

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Issues: Whether Cenvat credit was admissible to the assessee on the duty paid on wire drawing activity in view of the Taxation Laws (Amendment) Act, 2006, and the exemption claimed under Notification No. 9/2003-C.E. dated 01.03.2003.

Analysis: The appellants were manufacturing wire and bright bars and had availed credit on the footing that the activity did not amount to manufacture. The Tribunal noted that, by virtue of the Taxation Laws (Amendment) Act, 2006, the amount paid by the wire drawing unit was to be treated as duty because the wire drawing unit was also held to be a manufacturer. Once the amount paid was treated as duty, the credit taken by the appellants on such duty payment could not be disallowed.

Conclusion: Cenvat credit was admissible to the assessee and the disallowance of credit and penalty were not sustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed.

Ratio Decidendi: Where the amount paid by a unit is statutorily treated as duty because the activity is recognised as manufacture, credit of such duty cannot be denied to the recipient who has taken Cenvat credit on that payment.

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