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Manufacturing or not

anil bhargava (director) (45 Points)

16 August 2009

I intend to start a mix and match centre for offset printing units in Delhi.

I will buy ready made inks in 5 to 20 kgs cans. Then mix the same by hand to match the shade required by the printing unit and fill in 1 kg and 2 kg cans. Then sell.

Question 1: Will this amount to manufacturing?

Question 2: The turnover will be less than Rs 1.50 crores, do I need to register or inform any authority, other than sales tax department.

Thanks

Anil Bhargava

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11 Replies

Jayesh (Sr Article) (78 Points)
Replied 17 August 2009

In my Opinion mere Mixing the Two Products doesnt amount to Manufacturing...

If ur Product has got some Different Identity in Market or If there is any Entry in the Tarrife then it amounts to manufacture..

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anil bhargava (director) (45 Points)
Replied 17 August 2009

Thanks,

The products which will be mixed will be inks and the resultant will also be inks for same use, as only shade is being matched. Further the tarrif code will also not change.

Under the circumstances, should I presume, that theis business will be treated as trading and not manufacturing?

Anil Bhargava

P.Bashista (Advocate) (367 Points)
Replied 17 August 2009

The definition of manufacture is defined under section 2(f) of Central Excise Act.

Basically a process amounts to manufacture only when:

1. A new and distinct product having distinctive name, character or use comes into existence. 2. It should be fit for commodity use and has a commercial market.

Merely by putting large amount of goods into small amount of packings (as it is in your case) does not amount to manufacture. But if you are mixing the products in such a way that a new set of product comes into existence which has an entirely different market identity then it might amount to manufacture.

Answer to your second query is that all the manufacturers having a turnover of less than 1.5 crores in a financial year fall under SSI exemption. You do not need to take excise registration within this limit but the moment your turnover crosses Rs. 90 Lakhs in a financial year you need to inform the excise department.

Another thing I would like to tell you is that what ever process you are doing that amounts to manufacture or not, the onus is on the department to prove that. In general practice they might not reach you till the time you are within SSI limit. But the moment you will cross that limit this issue of manufacture has to be sorted out with the department at the initial stage only. Otherwise it will always be a problem in your future working.

anil bhargava (director) (45 Points)
Replied 17 August 2009

Dear Mr P Bashista,

Thanks for providing the knowledge.

Thus I will be acting as a trader and not a manufacturer.

In such a situation I need not inform excise/SSi, whatever be the turnover.

Is my assumption correct?

Thanks

Anil Bhargava

Tahseen Tabassum (CA-FINAL) (644 Points)
Replied 17 August 2009

1. According to Section 2(f) (iii) In relation to goods specified in the Third schedule involves packing or repacking of such goods in a unit container is manufacture, hence in your case a new product is also coming into existence therefore it will be a manufacture.

2. Reisteration:- Declaration in prescribed form should be made if aggregate value of your clearances exceeds 90 lakhas during immediately preceeding F/Y.

When you cross the limit of 150 lakhs you shall take registeration as your product will become dutiable after crosing limit of 150 lakhs

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anil bhargava (director) (45 Points)
Replied 17 August 2009

Dear Tahseen Tabassum,

The goods in question are printing inks and classified under tariff 32.15.

These goods do not appear in "goods specified in the Third schedule".

Hence repacking them should not be construed as manufacturing, that is my understanding. Under these circumstances, point no. 2 should become irrelevant.

Thanks

Anil Bhargava

P.Bashista (Advocate) (367 Points)
Replied 19 August 2009

You are not required to inform Excise department till your turn over is not reaching Rs. 90 lakhs in a financial year, though you do not need to pay duty and get registered with the excise department till you cross a turnover of 1.50 crores.

Whether you are a trader or a manufacturer is still a question of discussion. It cannot be decided without doing proper research on your activity though a bonafide belief is always a good excuse. That is why I told you earlier that you might be thinking that you are trading or you are not manufacturing or whatever. But the department might not think so and find this process amounting to manufacturing.