2003 (3) TMI 123 - SC - Central Excise

Cold drawing wire rod into thinner gauge is not manufacture; resulting wire not excisable, ruling favors taxpayer

SC held that cold drawing a wire rod into a thinner gauge does not amount to manufacture and therefore does not render the resultant wire excisable. The ... Manufacture - excisability of goods - tariff classification distinguishing rods and wires - Chapter Note definition of 'Wire'Manufacture - excisability of goods - tariff classification distinguishing rods and wires - Whether drawing duty-paid wire rods into a thinner gauge by cold drawing amounts to manufacture making the resulting wire excisable to duty - HELD THAT: - The Court accepted the factual premise that the input was a wire rod and the output was also a wire, the process consisting only of reducing the gauge and providing some finishing. The Court affirmed the Tribunal's earlier conclusion that no new product comes into existence when a rod is drawn into a thinner wire; the change was one of form and finish rather than creation of a distinct manufactured article. The presence of separate tariff entries for bars/rods and for wires, and differences in market price, do not by themselves establish manufacture or render the product excisable. Excisability follows only if the process produces a new article amounting to manufacture; that threshold was not crossed on the material before the Court. Thus the Tribunal's decisions holding the drawing process not to be manufacture were correct and were followed. [Paras 8, 9]Drawing wire rods into a thinner gauge by the processes in question does not amount to manufacture; the resulting wire is not excisable.Final Conclusion: All appeals dismissed; the Tribunal's view that cold drawing of wire rods into thinner gauge is not manufacture and does not render the product excisable is affirmed, with no order as to costs. Issues:1. Whether drawing wire into a thinner gauge amounts to manufacture and renders the wire excisable to duty.Analysis:The judgment addresses the central issue of whether the process of drawing wire into a thinner gauge constitutes manufacture and makes the wire excisable to duty. The Customs, Excise and Gold (Control) Appellate Tribunal previously held that this process does not amount to manufacture, citing precedents such as the case of Jyoti Engg. Corpn. v. Collector of Central Excise. The Tribunal reasoned that no new product emerges from this process, as both the raw material (wire rod) and the final product (wire) remain fundamentally the same. Civil appeals challenging these decisions were dismissed, reinforcing the Tribunal's stance.Furthermore, the Tribunal consistently applied these decisions in subsequent cases, including the matter involving M/s. Hind Enterprises, which was also dismissed by the Court. The argument was raised that the earlier decisions should be reconsidered in light of updated tariff items, specifically highlighting the distinction between Bars and Rods under tariff items 72.13 and 72.15, and Wires under tariff item 72.17. Additionally, Chapter Note 1(o) defining 'Wire' was invoked to support the contention that the drawn wire qualifies as a distinct product.However, the Court disagreed with this argument, emphasizing that the wire rod and the drawn wire both fall under the category of wire. The Court noted that while the gauge of the wire may change and the final product may be refined, no new product is created through this process. The Court affirmed the Tribunal's position that mere differentiation in tariff entries does not automatically render a product excisable; true excisability hinges on the presence of manufacturing activity. Consequently, the Court upheld the Tribunal's decisions, dismissing all appeals without costs.