Board’s Circulars have prospective effect only and not retrospective effect

[Bimal jain]

Dear Professional Colleague,

Board’s Circulars have prospective effect only and not retrospective effect

We are sharing with you an important judgment of the Central Government in the case of Uttam Galva Steels Pvt. Ltd. Vs. CCE Raigad [2014 (12) TMI 619–Government of India] on following issue:

Issue:

Whether the Board’s Circulars can be effective retrospectively?

Facts and background:

Uttam Galva Steels Pvt. Ltd. (“the Appellant”) was engaged in the manufacturing activity and the final products which were cleared on payment of duty included the products namely ‘H.R. Pickled Oils’ (“Pickled Oils”) and ‘HR Pickled and oiled coils’ (“Pickled Coils”). Pickled Oils and Pickled Coils were cleared for home consumption as well as exported under Rebate claim/ Bond.

The Appellant had filed various Rebate claims during the period of December 2009 to April 2010 involving an amount of ₹ 3,18,72.034/- but inadvertently mentioned the Tariff Classification of Pickled Coils as 72083940 in the Rebate claims which was similar to Tariff Classification of H.R. Coils declared as input in the Appellant’s application for Central Excise Registration.

However, the Appellant clarified that the inputs i.e. H. R. Coils received in the factory are subjected to the process of slitting, pickling, oiling and trimming and explained the processes involved in detail. Accordingly, it was contended that the process undertaken by the Appellant amounts to manufacture in terms of Sub Heading Note No. 3 of Chapter 72 of the Central Excise Tariff Act, 1985 which provides that the process of hardening and tempering, in respect of flat rolled products, amounts to ‘manufacture’.

The Department took a view that since the Appellant did not reveal that the process of pickling and oiling amounts to hardening and tempering, therefore the process of pickling and oiling carried out by the Appellant does not amount to manufacture.

Thereafter, the Adjudicating Authority rejected the entire Rebate Claim on the ground that process undertaken by the Appellant does not amount to manufacture in terms of Circular No. 927/17/2010-CX dated June 24, 2010 wherein it was clarified that ‘mere undertaking the process of oiling and pickling as preparatory steps do not amount to manufacture’. Later on, the Commissioner (Appeals) also upheld the same.

Held:

Being aggrieved, the Appellant filed a Revision Application before the Central Government under Section 35EE of Central Excise Act, 1944, wherein it was held that:

1. The Apex Court in the case of H. M. Bags Manufacturer Vs. Collector of Central Excise [1997 (7) TMI 119 - SUPREME COURT OF INDIA] and various subsequent judgements had stipulated that the Board's circular can have only prospective effect which is evidently the law of the land. Hence, rejection of the Rebate claims on the sole ground that the process does not amounts to manufacture by applying the Board’s Circular retrospectively i.e. prior to June 24, 2010 cannot be held sustainable and hence, liable to be set aside.
2. In Ajinkya Enterprises, Pune, it has been held that once the duty on final product has been accepted by the Department, the Cenvat credit availed need not be reversed even if the activity does not amount to manufacture.

In view of above findings, the Government set aside the Orders of the Lower Authorities and allowed Revision application.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks and Best Regards,

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

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