Manfacturing activity

[ASHOK AMIN]

Dear Sir,

We are manufacturers of electroplating chemicals and equipments. We purchased a meter long cloth and cut into pieces of 3 diameter. Now, this pieces of cloth are to be sent to diamond industries as it is for purification of metals at their unit situated at sez which falls under municipality area. My question is;

1) does cutting of meter long clothes amounts to manufacture,

2) does octroi charges will be levied for this sale,

3) since it is to sent to sez, should we prepare A.R.E.1.

Please give me the reply as soon as possible.

[bhart b sharma]

no. because it does not give new form, quality, etc.

Word “manufacture” in Section 2(f) of Central Excise Act, 1944 means production of article from raw or prepared materials, by giving new form, quality, properties or combinations including any process incidental or ancillary. Every type of change in shape, cutting etc does not amount to “manufacture”, as held in number of decisions of Court

[ASHOK AMIN]

Thank you for your reply Sir.

AI Summary

Manufacture definition: mere cutting of cloth into pieces does not constitute manufacture for excise purposes.
Mere cutting of a continuous length of cloth into pieces that does not produce a new form, quality, property or combination does not amount to manufacture for central excise purposes; incidental processes qualify only when they effect such substantive transformation. The record contains no substantive response on octroi liability or the need for A.R.E. 1 for movement to an SEZ.