By TIOL News Service

MUMBAI, JAN 01, 2016: THE facts are that during the period September 2002 to March 2004, the appellant herein availed CENVAT Credit on the various inputs like, Acid, Zinc 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 does not amount to manufacture and hence the CENVAT Credit availed by the appellant is incorrect. Revenue adverted to the apex court decision in Technoweld Industries - 2003-TIOL-37-SC-CX where it is held that drawing of wire from wire rods does not amount to manufacture.

The SCN was followed with an adjudication order and the demand was confirmed along with interest and penalties.

This was in March 2005.

An appeal came to be filed thereafter and the same were heard recently.

The appellant submitted that by the Taxation Laws (Amendment) Rules, 2005 vide a retrospective amendment 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. Further, the said Bill was passed by the Parliament and subsequently CBE&C Circular No. 831/8/2006-CX dated 26.7.2006 clarified the issue further.

The AR did not have much to add except reiterate the finding of the adjudicating authority.

The Bench extracted Circular dated 26.7.2006 (issued in the context of Taxation Laws (Amendment) Act, 2006 which came into effect from 13.07.2006) in its entirety and after adverting to paragraph 4.4 of the same observed -

"…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 Board's Circular, the demands raised on the appellant herein is incorrect and the impugned order needs to be set aside and we do so…"

Holding that the impugned order was not sustainable, the same was set aside and the appeal was allowed with consequential relief.

Quick reference: Paragraph 4.4 of Circular 831/8/2006-CX reads -

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.

(See 2016-TIOL-05-CESTAT-MUM)