Re-packing from 50kg bags to 25kg bag of raw material amounts manufacture or cleared as such transaction?

[Yatin Bhopi]

Dear experts

We are manufacturer (Chapter heading No 39) and our products are only for industrial use (No retail sale). Our products are valued as per section 4 (on transaction value).

We have purchased product X our raw material and which is falling under chapter 29. Now due to cancelation of final product order, we wish to sale this raw material X. Product X was purchased in 50kg bags but the customer is insisting to send the product X in 25kg bag instead of 50kg bag (No any other activity is carrying out) . Please let me know:

Can we sale product X in 25kg after re-packing it from 50kg bag? And are we need to follow rule 3 (5) of CCR 2004 to pay duty? or

Is this activity amounts to manufacture? And duty will be payable on transaction value.

[PAWAN KUMAR]

Dear Sir,

As per my view, please read the chapter heading notes of main chapter 29. The re-packing of goods from bulk packing into small packing is under manufacturing operation, hence excise duty on transaction value will arise. The subject goods shall be supplied at current rate of duty on transaction value.

[Mahir S]

Sir,

Packing/repacking is not being done for the finished goods but for the raw material purchased.

I assume you should clear the goods under rule 3(5) of the CCR,2004, as clearing under finished goods shall invite unnecessary confusion, as you are carrying out such procedure only once and due to cancellation of your final product order.

[Mahir S]

Sir,

If its a one time clearance, then you may clear it under rule 3 (5).

If it is a continuous process, then it shall be termed as manufacture of goods, as explained by pawan ji.

AI Summary

Repacking as manufacture may attract excise duty; one time clearance can be effected under the clearance rule instead. Repacking purchased raw material from larger to smaller bags may be treated as manufacture under the chapter heading notes, thereby attracting excise duty assessed on transaction value; however, an isolated or one time repacking carried out solely to clear the material may be cleared under the clearance rule instead, while continuous or regular repacking as part of the business process is likely to be treated as manufacture.