Duty Paid on non-dutiable/non excisable goods – Board issues notification
YOU pay excise duty on a product and take credit on the inputs used in its manufacture. Later, a Court declares that your product is not excisable or not dutiable. Now the Department has strange ways of dealing with the situation. It will ask you to reverse the CENVAT Credit taken on the inputs as the final products are not dutiable. But what about the duty paid? Department will say, it is not duty at all – how can you pay duty when duty was not payable at all? Will you get refund? Are you joking? You have collected the amount from your customer and so the amount is payable to the government. Will the buyer get credit? No, as what was paid was not duty!!!!!
In 2007, the Law was amended and under Section 5B of the Central Excise Act, the Government could by notification order for non-reversal.
The original litigation on the issue started with the zigzag case of Technoweld Industries - , wherein the Supreme Court finally held that drawing wire from wire rods does not amount to manufacture. Harassed assessees had to persuade the government to undo the Supreme Court decision.
Now the Board notifies that assessees who have paid duty on the drawn wire and who have taken CENVAT Credit need not reverse the Credit and this is applicable only if the Credit was taken prior to 8th July 2004! That means this notification is applicable only to disputes relating the period prior to July 2004.
The Supreme Court Judgement in Technoweld case came in March 2003. Section 5B was inserted in May 2007 and Board gives the clarificatory Notification in 2010! Better late than never!!!!!!
And why can't this be made applicable in all cases and not for wire alone?
Please also see - 06.05.2008
Notification No. , Dated: September 1, 2010