JUDGMENT
Jeet Ram Kait
1. This is an appeal against the order-in-original No. 53/2000-SP dated 10.11.2000 confirming an amount of Rs. 8,72,481/- being the duty of excise payable on cold drawn wire rods manufactured and cleared by them under Section 11 (A) of CE Act, 1944. They have also been directed to pay interest @ 24% per annum on the amount of Rs. 6,27,449/- being the duty involved on the goods cleared during the period from 13.5.97 to 23.9.97 for the periods starting from the first day of the month succeeding the month in which the duty as aforesaid ought to have been paid till the date of payment of duty as provided in the Section 11 AB of the CE Act, 1944. He has also imposed penalty of Rs. 6,27,449/- under Section 11 AC of the CE Act and another penalty of Rs. 50,000/- under Rule 173 173Q (1)(a) of CE Rules, 1944.
2. Ld. Counsel Shri A. Sarvesvara Rao has invited out attention to number of judgements which have been rendered by the Tribunal in the case of Premier Winding Wires & Conductors v. CCE, Nagpur reported in 2001 (115) ELT 698 (T) wherein it has been held that re-drawing of wires from coils does not amount to manufacture, since inputs being in coil form cannot be considered as copper bars or rods under Note (1)(d) to Chapter 74 of CETA, 1985. He also invited out attention to the Tribunal’s judgement rendered in the case of Steel Strips Ltd. v. CCE, Chandigarh reported in 2001 (130) ELT 137 (T-Delhi) that hot rolled steel strips and cold rolled strips, though both fall under the two different sub-headings of the same chapter heading namely 73.11, the process of cold rolled steel strips from hot rolled steel strips does not amount to manufacture. It has also been held that it is not sufficient for the Revenue to state that Apex Court judgment in their own case is not relevant in the context of new Tariff within the meaning of Section 2(f) of CE Act, 1944. Ld. Counsel also invited our attention to Tribunal’s judgement rendered in the case of CCE, Jaipur – I v. Balaji Udyog reported in 2001 (132) ELT 59 (T-Delhi) in which it has been held that drawing wire from wire rods of 6mm to 9mm thickness, resulting in reduction of thickness does not amount to manufacture. He also relied on another judgement rendered by the Tribunal in the case of Perfect Strips v. CCE Delhi – III (T-Delhi) wherein it has been held that conversion of hot rolled steel strips into cold rolled steel strips does not amount to manufacture even under the new Tariff. He also invited our attention to another judgement rendered in the case of Garson Metal Rolling Mills v. CCE, Chandigarh reported in 2000 (120) ELT 376 (T) in which it has been held that cold rolling and trimming undertaken by the assessee on duty paid hot rolled untrimmed sheets received by them from the job workers does amount to manufacture. Ld. Counsel also relied on Tribunal’s judgement rendered in the case of Vishvaman Industries v. CCE, Delhi – I reported in 2001 (127) ELT 155 (T – Delhi). The judgement rendered by the Tribunal in the case of Vishvaman Industries v. CCE, Delhi – I has been confirmed by the Hon’ble Supreme Court by rejecting the appeal filed by the Revenue by their order dated 19.3.2001 reported in 2001 (131) ELT 825 (SC). He has therefore prayed that the order of the Ld. Commissioner may be set aside with consequential relief to them.
3. Ld. DR Shri A. Jayachandran invites out attention to page 39 of the paper book and to distinguish between the hot rolled products and cold drawn products and he specifically invited out attention to paras where Commissioner has analysed the whole issue, which is extracted herein below:
In this context, it is relevant to examine the principles of hot and cold working of metals and their effect on mechanical properties, in order to appreciate whether any distinctly different marketable commodity emerges on account of the process of cold drawing carries out on hot rolled wire rods. Plastic deformation of a metal above the re-crystallization temperature, but below the melting or burning point is called hot working, whereas plastic deformation of a metal below its re-crystallization temperature is known as cold working. Cold worked
products can be distinguished from hot rolled or hot drawn products by the following criteria:-
the surface of cold worked products has a better appearance than that of products obtained by a hot process and never has a layer of scales.
The dimensional tolerances are smaller for cold worked products.
Microscopic examination of cold worked products reveals a marked deformation of the grains and grain orientation parallel to the direction of working. By contrast, products obtained by hot processes show almost regular grains owing to re-crystallization.
Because of the strain or work hardening they have undergone, cold worked products are very hard and possess great tensile strength though these properties may diminish appreciably with heat treatment.
Elongation at fracture is very low in cold worked products; it is higher in products that have undergone suitable heat treatment. (page 98) (section XV, chapter 72 of HSN explanatory notes)
HOT WORKING COLD WORKING
Purpose of hot working Purpose of cold working
(a) To shape metal into useful (a) Cold working is widely applied
objects as a forming process for finish
metal products
(b) To improve the properties of (b) To obtain thinner material
the metal, as compared to those in
cast conditions
(c) To produce raw material to be (c) To obtain better surface finish
used for subsequent cold working
operations
(d) To obtain greater dimensional
accuracy
(e) To obtain increased mechanical
properties
Effect on properties Effect on properties
(a) Mechanical properties, – Increases:
especially elongation, reduction of (i) Ultimate tensile strength
area and Izod values are (ii) Yield strength
improved, but fibre and directional (iii) Hardness
properties are produced (iv) Fatigue strength
(v) Residual
- Decreases:
(i) Percentage elongation
(ii) Reduction of area
(iii) Impact strength
(iv) Resistance to corrosion
(v) Ductibility
- Good surface finish
(Source:- Chapter 38 - Mechanical working of metals from "A Text Book of Material Science and Metallurgy" by Shri O.P. Khanna)
From the above, it is seen that while the ordinary requirement of wire rods can be met by the hot-rolling process, there are many requirements that demand greater accuracy, higher physical properties, better surface finish, thinner materials that can be produced by hot working methods. The demand is met by cold drawing the hot rolled wire rods as a finishing operation. Cold drawing results in the production of wire rods with smaller diameter, better surface finish closer dimensional tolerances, increased mechanical properties such as tensile strength, uniform cross sectional diameter from end to end etc. When hot rolled wire rods are priced at around Rs. 13,000 per MT, cold drawn wire rods are sold at around Rs. 15,000/- per MT, with a value addition of about 15%. In the steel market too, hot rolled wire rods and cold drawn wire rods are identified as two distinctly different products. While hot rolled wire rods are marketed in irregularly wound coils, cold drawn wire rods are mostly sold in straightened and cut rods. The difference in physical and mechanical properties, the difference in value and the different end uses to which the two products are put, and the different Sub-headings of the tariff under which the two products get classified make it clear that the change or series of changes brought about by the application of cold drawing processes take the hot rolled wire rods to the point where, commercially, it can no longer be regarded as the same original commodity but is, instead, recognised as a distinct and new article that has emerged as a result of the processes. Hence, the process of cold drawing and allied activities undertaken by M/s. SVSI amounts to manufacture and the resultant products, namely, cold drawn wire rods, classifiable under sub-heading 7215.20 of the schedule to the Central Excise Tariff Act, 1985 are excisable goods.
4. We have examined the whole issue and come to the conclusion that the issue is no longer res integra so long as the wire drawing is drawn from the duty paid products, whether the products are hot rolled or cold rolled does not amount to manufacture even under the new Tariff. We, therefore, by following the ratio of the judgment cited by the Ld. Counsel hold that such products are not manufacture within the meaning of the Section 2(6) of the CE Act, 1944 and are therefore, not liable to any Central Excise duty. We therefore set aside the impugned order passed by the Ld. Commissioner, with consequential relief, if any. Ordered accordingly.
(Pronounced & Dictated in Open Court)