TaxTMI 
TaxTMI 
2026 (5) TMI 654
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.... same under Customs Tariff Heading (CTH) 7229 9090 while claiming the benefit of the applicable exemption Notification No. 152/2009-Cus. dated 31.12.2009 (Sl. No. 576) which attract BCD @5%. 1.2 During the scrutiny of the import documents, the department formed a view that the imported goods were not "wire" but "wire rods" classifiable under CTH 7227, observing that the goods were imported in irregularly wound coils and had not undergone substantial cold drawing process. Relying upon the Mill Test Certificate indicating JIS G4053 grade and SCM435, the department alleged misclassification under CTH 7229 for wrongful availment of exemption under Notification No. 152/2009-Cus. A show cause notice was therefore issued proposing reclassification under CTH 7227 9040 of the Customs Tariff Act, 1975, denial of exemption, recovery of differential duty of Rs. 11,53,83,925/- with interest under Section 28AA, confiscation of the goods under Section 111(m) and imposition of penalties under Sections 112(a) and 114AA of the Customs Act. After adjudication, the Principal Commissioner confirmed the demand with interest, ordered confiscation of the goods with option for redemption on payment of f....
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....g process or the physical characteristics of the imported product in detail. 4.7 The Ld. counsel submits that the essential distinction between wire rod and wire lies in the manufacturing process. Wire rods are hot-rolled semifinished products which require further cold drawing before becoming wire. In the present case, the imported goods have already undergone spheroidized annealing and cold drawing process and are supplied as finished cold heading quality wire. 4.8 It is therefore submitted that the classification adopted by the appellant under CTH 7229 is correct and the impugned order deserves to be set aside. 5. On the other hand, the Ld. Authorized Representative, Shri Anoop Singh vehemently argued that the item under import is specifically classifiable under the CTH 72279040 by nomenclature as 'cold heading quality rod'. The grade and specification (SCM 435 equivalent of JIS G 4053) mentioned in the Test/Mill Certificate accompanying the import document clearly indicate that the item is wire rod. The importer has declared the Mill Test specification as G4053. On perusal of G4053- Japanese Industrial Standard translated and published by Japanese Standards Ass....
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....e imported goods are classifiable under CTH 7229 9090 or CTH 7227 9040 8.1 The vital question requiring resolution in this case is whether the item imported by the Appellant is 'wire of other alloy steel' falling under the CTH 72299090 or 'Cold Heading Quality Wire Rod' falling under the CTH 72279040, the final decision of which has the bearing on the concessional duty benefit being claimed by the Appellant by availing the notification based on the country of origin under Sl. No. 576 of the Notification of Customs No. 152/2009 dated 31.12.2009, as per which the Basic Customs Duty is 5%. The answer to the above can be attempted by referring to the scheme of classification read with Section, Chapter and HSN Explanatory Notes that offer a safe guide in arriving at right classification and the rest is the actual industry practice that uses a particular item as a raw material in the cold heading forming industry. 8.2 The competing entries in the case are the CTH 72279040 as confirmed by the Respondent Department and the CTH 72299090 as declared / claimed by the appellant. These two entries along with its corresponding Section, Chapter and HSN Explanatory Notes are ....
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....#39;wire' (7229). This further points to the fact that the rod is subjected to further processes, however nuanced, to make it a 'wire'. A close reading of Section and Chapter Note to the competing entries does not point to any major difference between 'rod' and 'wire'. However, the HSN Explanatory Note to the Chapter Headings 7227 given above clearly indicates that the products falling under 7227, also known as 'wire rod' are mainly used for drawing into 'wire'. Similarly, Chapter Note to Chapter 72 pertaining to wire defines wires as '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'. The corresponding HSN Explanatory Note offers more expansive definition of wire by stating that 'Wire is mostly produced from hot-rolled bars and rods of heading 72. 13 by drawing them through a die but may also be obtained by any other cold-forming process (e.g., cold-rolling)'. From the above it is clear that in order to be classified under the CTH 7229, the hot rolled rod should have undergone the process of drawing through a die or ....
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....rod. Wire rod is the input material to manufacture wire. The denotation of SCM 435 in the Mill certificate is to convey that the wires are manufactured out of wire rods of SCM 435 grade and nothing else. It can, in no way connote that mentioning of SCM 435 must necessarily lead to the conclusion that the item is wire rod. The appellant has shown clearly that the supplier has used CHQ Wire rod to draw wire and the wire rod is of SCM 435 grade. The mill certificate too legibly mentions the description of item as Cold Heading Quality Wire connoting that the wires are made from SCM 435 grade wire rod and nothing else". Hence, after considering the above submissions of the appellant, we are unable to accept the argument of the Department that mentioning of SCM 435 in the mill certificate must mean that the item imported is wire rod and not wire. 9.3 Another contention of the Department is that SAIP mentioned in the mill certificate suggest that the goods have undergone SAIP (Spheroidized Annealing in Process) which is a heating process to achieve good Cold Heading properties and to make it fit for cold forming and hence it is not cold work. We are unable to agree with this argument b....
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....t. Before proceeding to examine the contentions raised by both the parties, it is necessary to reproduce the IIT expert opinion as below: - In this connection, it is the argument of the appellant that the same is purely based on the subjective opinion of the faculties on the basis of material supplied by the Department, rather than based on any technical or scientific data. Further, it is submitted that the kind of materials supplied to the experts were not made available to the appellant. Even from the details available in the expert opinion, it can be inferred that the wire rod is subjected to processes like pickling, spheroidized annealing, again pickling and a cold drawing step. Here, the opinion fairly accepts that the wire rod has undergone 'cold drawing process'. Next, it is opined by the experts that the reduction in diameter is minimal and the same is done to control the dimensional tolerance in order to aid cold heading process. We find this observation that admits that there is a limited wire drawing process. The observation that the reduction in diameter after wire drawing is minimal would not aid the Department's contention that after wire drawing which is a....
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....ls under the HS Code 7227 and sends it to M/s. Xact Special Steels Private Limited (job worker) for wire drawing purposes and placed few sample invoices and photographs from the domestic supplier of wire rod and the job worker on record. After the wire rod is made into wire in the factory premises of M/s. Xact Special Steels, the same is brought to Appellant's factory as wire under the HS Code 7229. We have perused those documents and found the claim of the Appellant to be true. What emerges from the above is that the Appellant do not carry out wire drawing in their factory premises and input material for cold heading bolt making is received in the form of wire, both in the case of import and domestic procurement. The fact that the input for cold heading bolt making is 'wire' is supported by the absence of wire drawing facility at the Appellant's premises as well as the proofs adduced as above. In these facts and circumstances and in the absence of any contrary claim by the Respondent, we hold that the item imported by the Appellant is 'wire' falling under the HS Code 7229 and not 'wire rod' classifiable under 7227. 9.7 Further, we find that the distinction between wire rods and....
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.... imported goods are hot-rolled wire rods rather than cold drawn wire. 10.1 In view of the tariff provisions, metallurgical processes, technical documentation and judicial precedents discussed above, we find that the imported goods described as Cold Heading Quality Alloy Steel Wire in Coils - Grade SCM435 possess the essential characteristics of alloy steel wire obtained through cold drawing processes. The goods are therefore correctly classifiable under Customs Tariff Heading 7229 9090 as declared by the appellant and not under Heading 7227 as alleged by the department. Issue No. (i) is accordingly decided in favour of the appellant. Issue No. (ii) Whether the appellant is entitled to the benefit of Notification No. 152/2009-Cus, and consequently whether the demand of differential duty along with interest is sustainable. 10.2 We find that the denial of exemption under Notification No. 152/2009-Cus and the consequential demand of differential duty amounting to Rs. 11,53,83,925/- confirmed in the impugned order arise solely from the department's conclusion that the imported goods are classifiable under Heading 7227 rather than Heading 7229. However, in the preceding discussi....
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....exemption. Once the primary allegation itself fails, the penalties imposed under these provisions cannot survive. Since the demand of differential duty itself does not survive on merits, the question relating to limitation and invocation of the extended period becomes largely academic. Nevertheless, we note that the dispute in the present case pertains to the classification of goods and interpretation of tariff entries, and there is no material on record to establish suppression, misdeclaration or wilful misstatement on the part of the appellant. Consequently, the invocation of the extended period of limitation would in any case not be sustainable. 12. In view of the foregoing discussion and findings, we hold that the imported goods described as "Cold Heading Quality Alloy Steel Wire in Coils - Grade SCM435" are correctly classifiable under Customs Tariff Heading 7229 as declared by the appellant. Consequently, denial of exemption under Notification No.152/2009-Cus is not justified. 13. One of the arguments of the Appellant is that the differential duty quantification has been done erroneously by adding the differential duties in respect of warehousing bills of entry, thus ma....
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.... wire type lead), spring, high tensile, hardened and tempered wires, not insulated : Wire (excluding wire type lead) kg. 7229 90 31 7229 90 32 Spring wire kg. High tensile wire kg. 7229 90 33 kg. Hardened and tempered wire 7229 90 34 7229 90 40 kg. Other wire Shaped and profiled wires of cross-section : kg. Half round 7229 90 51 kg. Flat and rectangular 7229 90 52 kg. 'L' shape 7229 90 53 7229 90 54 kg. 'Z' shape kg. kg. 7229 90 59 Other Electric resistance wire (including electric resistance heating wire) Crimped wire 7229 90 60 kg. kg. 7229 90 70 Appellant's Classification Other 7229 90 90 Document 2 Wire rod Pickling Wire drawing Inspection Pickling & Coating Annealing Coil packing Inspection Skin pass Document 3 Department of Metallurgical and Materials Engineering Indian Institute of Technology Madras Chennai - 600 036, India March 11.2020 Tá»™c Mr. S. Saravaca Per untal Joint Commissioner of Customs (Audio) Office of Commissioner of Customs (Audit) Custom House, No. 60, Rajuji Salai, Chennai 600 001 Ref: F.No. CHEZ200/C-VTRA-52/2019-AUDI....