The Hindu Business Line : `Steel wire industry facing excise problems'

THE Steel Wire Manufacturers Association of India (SWMAI), representing the domestic steel wire and wire industry, has claimed that the industry was confronted with a "serious problem" in the wake of a recent Supreme Court judgement that bracketed the process of drawing wires from rods as not "excisable".

According to the association, the judgement has created serious complications for `Modvatability' of steel wires, as it served to "break the Cenvat value chain system".

An association representative said: "Raw material for wire manufacturing is wire rod, which is purchased after duty is paid. Being the product of large-scale organised sector, no wire rod in the market is available as non-duty paid or exempted."

Hence, if there is no duty on the wire drawing, the wire manufactures will not be in a position to avail Cenvat credit of duty paid on the wire rod.

The representative added: "Accordingly, the cost of excise duty will be loaded in the cost of raw material. This has made the domestic industry vulnerable against import, as Cenvat will be available to the imported wires, while the local manufacturers will not be able to pass on the same benefit to the consumers."

In the light of this, SWMAI has urged the Government to take immediate steps to remedy the situation by amending the law in relation to the wire drawing process by introduction of specific notes in the relevant chapter of the Central Excise Tariff.

This could be done by bringing the activity of wire drawing under the purview of manufacture, according to the association.

Wires are manufactured by cold drawing process from wire rods, with the process being not simply a process of reduction of cross-sectional dimensions of the wire rods, but one involving a complex technological process.

"This of vital importance as it would facilitate steel wire manufacturers to avail the Modvat benefit and pass it on to the customers.

"Further, since there is substantial value addition in the process of wire drawing, all these manufacturing units are paying excise duty through PLA of Rs 250-300 crore."

Thus, if the Government continues to treat this activity of wire drawing as one outside the ambit of manufacturing, it will be losing this amount as net revenue, the association said.

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