Circular No. 570/7/2001-CX
16th February, 2001
From F. No. 139/7/2000-CX.4
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Subject : CE – Whether drawing of wire from wire rod amounts to manufacture under section 2(f) of Central Excise Act, 1944.
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 units 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 v. 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 1-3-1988, vide Chapter Note 1(o), the definition of ‘wires’ changed to “cold-formed products in coils, of any uniform solid cross-section along with their whole length, which do not confirm 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 29-5-1995 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) E.L.T. 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 ofNavsari Processing Industries [1996 (85) E.L.T. 386 (T)] wires were drawn from the wire rods of 8 mm 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 sub-headings. 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.