7th September, 2001.
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Subject:- Whether slitting of HR/CR coils of iron and steel sheets into strips would amount to manufacture – Regarding –
A question has arisen as to whether cutting of HR/CR coils of iron and steel into sheets and slitting of HR/CR coils/sheets of iron and steel into strips would amount to manufacture.
2. The matter relating to cutting of HR/CR coils of larger width and running length in the form of coil into sheets of the same width but specific sizes was considered in Tariff Conference of Chief Commissioners held at Mumbai at 29.8.2000 and the general view was that the activity would not amount to manufacture. The matter has been further examined in the Board.
3. As far as slitting of HR/CR coils of iron and steel into strips of smaller width is concerned, two view points have been expressed by the field formations and the trade. One view is that if as a result of slitting the classification of the product changes from heading 72.08/72.09 to 72.11/72.12 in respect of iron or non-alloy steel strips and from heading 72.19 to 72.20 in respect of stainless steel strips, a new product with commercially distinct name, character and use has come into existence and hence the process would amount to manufacture.
4. Another view is that mere slitting is not a process of manufacture. The products before and after slitting remain flat-rolled products and do not have new and distinct identities. Thus, the activity should not amount to manufacture.
5. Law Ministry was therefore consulted by the Board in the matter and they have opined as follows:-
“A somewhat similar issue was examined by the Apex Court in the case of Lal Woollens and Silk Mills (P) Ltd. Vs. Collector of Central Excise 1999 (108) ELT 7SC. In this case the plea of the appellant that conversion of grey yarn into dyed yarn did not amount to manufacture was not accepted by the Apex Court. The Apex Court observed that since both “dyed yarn” and “grey yarn” are covered by two separate distinct heads of Tariff items with different duty, the same would amount to manufacture as the separate Tariff entries recognised them as two different goods with seperate levy. Applying the said ratio of the Apex Court to the issue before us, since the classification of the product changes from sub-heading 72.08/72.09 to 72.11/72.12 the same would amount to manufacture as the end product being covered under different Tariff entries.”
6. In the meantime, we have also received CEGAT judgement in the case of CCE Mumbai Vs. Bamcee Ltd. [2001(128) ELT (Tribunal – Delhi)]. The Tribunal has held that slitting and shearing of duty paid flat rolled steel coils purchased from the market will not amount to manufacture if the resultant product remained classifiable under the same tariff sub-heading and it would amount to manufacture where tariff sub-heading changes.
7. In the circumstances, it is hereby clarified that cutting of HR/CR coils of iron or non-alloy steel into sheets or slitting into strips of lesser width; or slitting of sheets into strips will amount to manufacture if the resultant product is classifiable under different sub-heading of the Central Excise Tariff.
8. The trade and the field formations may be suitably informed.
9. Receipt of this Circular may please be acknowledged.
10. Hindi version will follow.