2013 (11) TMI 29 - HC - Central Excise

Court overturns orders, remands refund claims due to statutory inconsistencies.

The court held in favor of the petitioner, finding that the orders by the Commissioner (Appeals) and the adjudicating authority were inconsistent with the ... Refund of unutilized cenvat credit - drawing of SS wire from SS rods - Meaning of Assessee Rule 16 of the Central Excise Rules – Whether the judgment in the case of Commissioner of Central Excise v. Technoweld Industries Industries [2003 (3) TMI 123 - SUPREME COURT OF INDIA] was applicable – dispute for the period from 29-5-2003 to 8-7-2004. - Held that:- Held that:- 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 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. In the light of the amendment in the statutory provisions, the 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 cannot sustained –, the refund claims of the petitioners shall stand restored to the file of the adjudicating authority - Decided in favour of Petitioner. Issues Involved:1. Whether the process of drawing stainless steel (SS) wire from SS rods amounts to 'manufacture.'2. The applicability of the Supreme Court judgment in Commissioner of Central Excise v. Technoweld Industries.3. The entitlement of the petitioner to Cenvat credit and refund claims.4. The impact of the Taxation Laws (Amendment) Act, 2006 on the petitioner's case.Issue-Wise Detailed Analysis:1. Whether the process of drawing stainless steel (SS) wire from SS rods amounts to 'manufacture':The petitioner, a private limited company engaged in manufacturing SS wires, contended that the process of drawing SS wire from SS rods should be considered as 'manufacture.' Initially, under the erstwhile Tariff Item 26AA of the Central Excises & Salt Act, 1944, and subsequent judicial precedents, the process was considered manufacture. However, the Supreme Court in the case of Technoweld Industries held that drawing MS wire from MS rods did not amount to manufacture. Despite this, the Central Board of Excise & Customs (CBEC) issued a circular on 16-2-2001, maintaining that drawing wire from wire rod was manufacture, which was later withdrawn on 29-5-2003 following the Supreme Court's judgment.2. The applicability of the Supreme Court judgment in Commissioner of Central Excise v. Technoweld Industries:The petitioner challenged the applicability of the Supreme Court's decision in Technoweld Industries to their case, arguing that the processes undertaken by them for producing SS wires should be considered manufacture. Despite the Supreme Court's ruling and subsequent withdrawal of the CBEC circular, the petitioner continued to pay excise duties on SS wires, and the Revenue authorities collected such duties without objection.3. The entitlement of the petitioner to Cenvat credit and refund claims:Following the withdrawal of the CBEC circular, the petitioner faced a show cause notice denying Cenvat credit for the period from 29-5-2003 to 8-11-2003. The petitioner argued that they were entitled to Cenvat credit for duties paid on raw materials. The Commissioner of Central Excise rejected the refund claims as premature, leading the petitioner to file appeals. During the pendency of these appeals, the Tax Laws Amendment Bill, 2005, was introduced, amending Rule 16 of the Cenvat Credit Rules with retrospective effect, thereby regularizing the availment of credit during the disputed period.4. The impact of the Taxation Laws (Amendment) Act, 2006 on the petitioner's case:The Taxation Laws (Amendment) Act, 2006, amended Rule 16 of the Central Excise Rules, 2002, retrospectively, including wire drawing units as 'assessee' and allowing them to avail Cenvat credit. The amendment was effective for the period from 29-5-2003 to 8-7-2004. The petitioner argued that this amendment entitled them to Cenvat credit for the disputed period. The respondents did not dispute this legal position.Judgment:The court held that the impugned orders by the Commissioner (Appeals) and the adjudicating authority were contrary to the amended statutory provisions. The court quashed and set aside the orders, restoring the refund claims to the adjudicating authority for fresh consideration in light of the amended provisions. The petition was allowed with no order as to costs.