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Whether drawing of wire from wire rod amounts to manufacture under
section 2(f) of Central Excise Act, 1944
Circular
No. 570 dated 16th February 2001
A
question has been raised whether the process of drawing of wire from wire rod
would amount to manufacture under section 2(f) of Central Excise Act, 1944.
Though duties were being paid in various centres by the unit undertaking the
redrawing of wire from wire rods, doubts are being raised as CEGAT in a recent
order No. 85/2000-B dated 13.1.2000 in the case of M/s. Technoweld
Industries vs. CCE Jaipur has held that reduction of dimension or gauge of wire
rods by drawing is not a process of manufacture.
2.
The matter has been examined by the Board. It has been observed that
before Budget 1988, the Chapter 72 of Central Excise Tariff was not fully
aligned with HSN. According to the definition provided under the Chapter Note
1(xix), as was existing then, the wires are "cold/drawn products of solid
section of any cross-sectional shape, of which no cross-sectional dimension
exceeds 13 mm". Thus such products having cross-sectional dimension of 13
mm or less, though commercially known as wire rods were for Central Excise
purpose classifiable as wires. After 1.3.88, vide Chapter Note 1(O), the
definition of `wires' changed to "cold-formed products in coils, of any
uniform solid cross-section along their whole length, which do not conform to
the definition of flat-rolled products". This definition did not
contemplate any ceiling in the cross-sectional dimension, as was the case
hitherto-before. The wires were classified under heading 72.17.
Bars
and rods, on the other hand, got defined under chapter note 1(l) and 1(m) as
distinct from wires, and were shown against the headings 72.13, 72.14 and 72.15.
Thus, wires and wire rods were
considered two distinct commercial commodities and conversion of wire rods to
wires was treated as manufacture within the ambit of section 2(f) of the
Central Excise Act. The above position was clarified by the Board under F.No.
139/8/94-CX.4 dated 29.5.95 to dispel any doubt in the minds of the trade
Associations as well as the Commissioners after the Department's appeal filed
against the decision of CEGAT in case of Jyothi Engineering Corporation (1989)
42 ELT 100 (T) was dismissed by the Supreme Court.
3.
The issue also came up for discussion in the Conference of Chief
Commissioners held on 29-30 August 2000. The Conference took note of CEGAT
judgements including that in the case of M/s. Technoweld Industries. The
Conference observed that in the case of Navsari Processing Industries. The
conference observed that in the case of Navsari Processing Industries [1996(85)
ELT 386 (T)] wires were drawn from the wire rods of 8mm thick. As wires, as
defined under old Central Excise Tariff, covered thickness upto 13 mm, both the
products, input and output were treated as wires only. CEGAT held that this
activity would not amount to manufacture. In case of Technoweld Industries
relating to HSN based Tariff, CEGAT relied on its earlier decision of Navsari
processing Industries in connection with the old Tariff apparently not taking
note of the changes made in the tariff structure. The Department has decided to
file a civil appeal against the order of CEGAT passed in Technoweld case. The
conference took note of the aforesaid developments and observed that there is no
overlapping now in the meanings assigned to wires and rods (including wire rods)
and they are classified under separate subheadings. Commercially these are
recognised as two separate commodities. Once wires are drawn from the wire rods
conforming to the definition either under note 1(l) or under note 1(m) of
Chapter 72, the Conference felt the activity of drawing should be treated as
manufacture.
4.
Board agrees with the above views of the Conference and accordingly holds
that the drawing of wire from wire rods would amount to manufacture.
5.
Field formations and trade interests may be informed accordingly.
6.
Receipt of the circular may please be acknowledged.
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