Selling of trading goods from manufacture.

[ASHOK AMIN]

Dear Sir,

This issue is in respect of the trading goods being sold from manufacturing unit.

We had imported an item iron exchange resin (25 kgs pack) for our trading unit which was being billed to one of our sister concern unit who were registered under SSI. Our sister concern unit would sell the goods from their unit after repacking it in bottles. Now, the sister concern unit had shut down and merged with our manufacturing unit. Please note our trading unit and manufacturing unit are in the same place with different entries. Now, can we raise a bill from our trading unit to the manufacturing unit so that we can send from our manufacturing unit to our clients after repacking. Here also please note our trading unit is not registered under excise whereas, the manufacturing unit is registered. Our factory and sister concern are situated in the same state. Will there be any problem if from excise point of view. We require this reply on a very urgent basis.

[Rajagopalan Ranganathan]

Sir,

According to Section 2 (f) (iii) of Central Excise Act, "manufacture" includes any process,which, in relation to the goods specified in Third Schedule involves packing or re-packing of such goods in a unit container or labeling or re-labeling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer,

Therefore iron exchange resin ( I feel it is ion exchange resin) falls under sub heading 3914 of first schedule of Central Excise tariff Act, 1985 and does not fall under third Schedule of Central Excise Tariff Act, 1985 and repacking the said goods into bottles will not amount to manufacture.

If your SSI unit merges with you and both assets and liability are taken over by you then you can continue to trade in said goods subject to Section 2 (f) (iii) of CEA. 1944. However if you want to pass on the credit of CVD and SAD paid on imported ion exchange resin then you have to register yourself as first stage dealer with Central Excise Department.

If you want to trade from the same premises where you are engaging in manufacturing activity then there should be a distinct demarcation of boundaries between manufacturing unit and trading premises with separate entrance.

[ASHOK AMIN]

Thank you for your valuable advise Mr. Rajgopalan Sir.

[ASHOK AMIN]

Sir, I think one point is left to be answered i.e. can we raise an invoice from our trading unit (non-registered with excise) where the material (ion exchange) is stored to our manufacturing unit which is registered under excise and invoice from this registered unit to our clients with payment of duty.

AI Summary

Manufacture definition: repacking ion-exchange resin does not constitute manufacture, but dealer registration and premise separation required.
Repacking imported ion-exchange resin into bottles is packing and does not constitute manufacture because the resin falls under the relevant tariff heading and is outside the Third Schedule. If the SSI trading unit is merged and assets taken over, trading may continue subject to that manufacture-definition. To avail CVD and SAD credit on the imported resin the entity must register as a first stage dealer. Trading conducted at the same premises as manufacturing requires distinct physical demarcation and a separate entrance for excise compliance.