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Collector Of Central Excise v. Technoweld Industries .
Factual and Procedural Background
A set of appeals presenting a common question were disposed of by a common order. In all appeals, the respondents had purchased duty-paid wire rods and drew them into a thinner gauge of wire. The central controversy was whether this process amounts to “manufacture” and whether the resulting thinner-gauge wire is excisable.
The Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) had previously held, in Vishvaman Industries v. CCE (2001) 127 ELT 155 (Trib), relying on Jyoti Engg. Corpn. v. CCE, that drawing wire from wire rods does not amount to manufacture because no new product emerges; the raw material is a wire rod and the final product is still a wire. Civil appeals against both those Tribunal decisions were dismissed. The Tribunal continued to follow these decisions, including in a case concerning M/s Hind Enterprises, and the civil appeal against that order was also dismissed by the Court on 9-8-2002.
In the present appeals, reliance was placed on S. Shanmugavel Nadar v. State of T.N. (2002) 8 SCC 361 to submit that earlier civil appeals had been dismissed by non-speaking orders and that it remained open to the Court to consider the correctness of the Tribunal’s reasoning. The Court accepted this proposition and heard counsel at length.
Legal Issues Presented
- Whether the process of drawing duty-paid wire rods into thinner-gauge wire results in “manufacture.”
- Whether the thinner-gauge wire is excisable to duty, particularly in light of separate tariff entries for rods/bars (Tariff Items 72.13 and 72.15) and for wire (Tariff Item 72.17) and the definition of “wire” in Chapter Note 1(o).
Arguments of the Parties
Counsel's Submissions
- It was submitted that the Jyoti Engg. decision rested on a single tariff entry (26-AA(i-a)) covering bars, rods, coils, and wires, whereas the current tariff distinguishes bars/rods (Tariff Items 72.13 and 72.15) from wires (Tariff Item 72.17), and Chapter Note 1(o) defines “wire.”
- Counsel took the Court through the manufacturing processes described in orders of the Commissioner, contending that the raw material is a rod under Tariff Item 72.13 and/or 72.15 and that, after processing, a distinct and marketable product under Tariff Item 72.17 emerges.
- Price disparity was highlighted: the raw material cost was approximately Rs 13,000 per metric ton, while the final product’s market price was approximately Rs 15,000 per metric ton.
- On this basis, it was urged that the earlier Tribunal decisions were incorrect and that the drawn wire produced by the cold drawing process is an excisable product.
- Relying on S. Shanmugavel Nadar v. State of T.N., it was further submitted that prior dismissals of civil appeals by non-speaking orders did not preclude the Court from reconsidering the merits; the Court agreed with this procedural proposition and proceeded to hear the matter.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Vishvaman Industries v. CCE (2001) 127 ELT 155 (Trib) | The process of drawing wire from wire rods does not amount to manufacture; no new product emerges. | Recognized as correctly stating the law; earlier civil appeals against it were dismissed. The Court affirmed that there is no manufacture in drawing wire into a thinner gauge. |
| Jyoti Engg. Corpn. v. CCE | Under tariff entry 26-AA(i-a), bars, rods, coils, and wires were grouped; drawing does not create a new product and hence no manufacture. | Treated as the foundational reasoning adopted by the Tribunal. The Court agreed with its core principle that no new product is manufactured by mere reduction in gauge. |
| Case concerning M/s Hind Enterprises | Tribunal followed Vishvaman and Jyoti Engg.; civil appeal was dismissed by the Court on 9-8-2002. | Noted as part of the consistent line of decisions dismissing challenges; supported the continuity of the approach that drawing wire is not manufacture. |
| S. Shanmugavel Nadar v. State of T.N. (2002) 8 SCC 361 | Dismissal of earlier civil appeals by non-speaking orders does not bar the Court from examining the correctness of the impugned decisions on merits. | Accepted to justify hearing the matter at length despite prior non-speaking dismissals; after hearing, the Court maintained the established position. |
Court's Reasoning and Analysis
The Court rejected the contention that drawing wire rods into thinner-gauge wire constitutes manufacture. It emphasized that the initial product was a wire rod and the ultimate product remains a wire; the process only reduces the gauge and marginally improves the finish. On that basis, the Court concluded that no new product comes into existence and, therefore, there is no manufacture.
The Court further clarified that the mere existence of separate tariff entries (for rods/bars and for wire) does not, by itself, render a product excisable. Excisability is predicated on the occurrence of “manufacture,” and without a transformation into a new product, the liability does not arise. Accordingly, the Court found the earlier Tribunal decisions to be correct and declined to depart from them, notwithstanding submissions regarding distinct tariff items, definitional notes, and market price differences.
Holding and Implications
All appeals DISMISSED; no order as to costs.
Implications: The immediate effect is that drawing duty-paid wire rods into thinner-gauge wire is not treated as “manufacture,” and the resulting product is not excisable on that basis in these appeals. The Court reaffirmed the Tribunal’s earlier view and reiterated that excisability depends on the occurrence of manufacture, not merely on the existence of separate tariff classifications. No broader implications or new legal rules were articulated beyond applying these established principles to the facts at hand.
Order
1. A common question arises in all these matters. All these appeals are thus being disposed of by this common order.
2. In all these appeals, the respondents purchased duty-paid wire rods and drew the wire into a thinner gauge. The question is whether by drawing wire into a thinner gauge, manufacture has taken place. The question is whether the wire of the thinner gauge is excisable to duty.
3. This question came to be considered by the Customs, Excise and Gold (Control) Appellate Tribunal. In the case of Vishvaman Industries v. CCE (2001) 127 ELT 155 (Trib) by an order dated 2-11-2000, it was held that the process of drawing wire from wire rods did not amount to manufacture. The Tribunal based its decision on an earlier decision of the Tribunal in the case of Jyoti Engg. Corpn. v. CCE. In Jyoti case the tariff entry concerned was 26-AA(i-a) which included bars, rods, coils, wires etc. The Tribunal has held that the raw material was a wire rod and the final product was also a wire. It has held that no new product has come into existence and that there was no manufacture. Civil appeals filed against both the aforementioned decisions were dismissed.
4. Thereafter, the Tribunal has been following these decisions in all cases. One of such cases, was the case concerning M/s Hind Enterprises. The civil appeal against that order was also dismissed by this Court on 9-8-2002.
5. Reliance was placed upon the authority of this Court in the case of S. Shanmugavel Nadar v. State of T.N (2002) 8 SCC 361 It was submitted that all the civil appeals had been dismissed by non-speaking orders. It was submitted that it is open to this Court to consider whether or not the impugned decisions of the Tribunal are correct. There can be no dispute with this proposition. We have, therefore, heard the learned counsel at length.
6. It is submitted that in Jyoti case, the decision was based upon the fact that there was only one tariff item, namely, 26-AA(i-a). It is submitted that new Tariff Items 72.13 and 72.15 deal with bars and rods whereas Tariff Item 72.17 deals with wires. Reliance is also placed upon Chapter Note 1(o) which defines “wire” as cold-formed products in coils, of any uniform solid cross-section along their whole length, which do not conform to the definition on flat-rolled products.
7. This Court was also taken through the processes which are undergone by the manufacturer and which have been set out in some of the orders passed by the Commissioner. It was submitted that the raw material is a rod falling under Tariff Item 72.13 and/or 72.15 whereas after processing a distinct and separate marketable product falling under Tariff Item 72.17 has come into existence. It was submitted that the market price of both the products is also different inasmuch as the cost of the raw material was approximately Rs 13,000 per metric ton whereas for the final product the market price was approximately Rs 15,000 per metric ton. It was submitted that under these circumstances, the Court must now hold that the earlier decisions of the Tribunal are not correct and that the final product i.e the wire which is drawn by the cold drawing process is an excisable product.
8. We are unable to agree with the submission. It is to be seen that the initial product was a wire rod. The ultimate product is also a wire. All that is done is that the gauge of the rod is made thinner and the product is finished a little better. In our view the earlier decisions of the Tribunal are correct. There is no manufacture of a new product. Merely because there are two separate entries does not mean that the product becomes excisable. The product becomes excisable only if there is manufacture.
9. In this view of the matter, we see no reason to hold otherwise. Accordingly, all the appeals are dismissed. There will be no order as to costs.
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