Query - Central Excise Procedures

Facts of the case:

A manufacturing company is in the manufacture of ready made garments. Manufacturing process:

It has three units.

Unit 1 situated in a suburb in Mumbai

Unit 2 and 3 are situated in another suburb in Mumbai. However, Unit 2 and 3 are located in the same Industrial estate.

Note: An industrial estate is a premise, where there are many units (galas) in which manufacturing or other commercial activities are being performed by many companies.


Dyed fabric is the main raw material. This material arrives at Unit 1. Unit 1 does activities such as cutting and stitching to make it into a cloth. It then sends the cloth to a Job Worker 1 for Embroidary work. It receives it, performs some more work on the cloth and then the cloth is sent to another Job Worker 2 for washing.

After washing, Job Worker 2 despatches the cloth to Unit 2 where the process of steam pressing - labelling - packing etc is done and cloth is now a ready made garment ready for sale. Manufacture is now complete.

Since there is insufficient space in Unit 2 to store the goods, all goods are sent to Unit 3 for storing from where goods are sold and invoices are raised.

A couple of pointers (in my opinion):

1. In Unit 1 Cutting and stitching is an incidental and ancillary process and is a work in progress not resulting in the manufacture of goods (the output - cloth is not marketable).
2. Job Work on Emrodidary and Washing is also an incidental process.
3. Manufacture is complete in Unit 2.

Query:

1. Registration is required only for Unit 2 OR for Unit 1 as well.

2. Is Registration required for Unit 3 as a warehouse, or we can seek permission from the Commissioner to keep the goods in Unit 3 pursuant to Rule 4(4) of C.E.Rules (which is storage outside the factory without the payment of duty). If the department asks for a bond we can provide the Bond.

Your opinion please preferably with relevant provisions of the Act, Rules and Case laws.

What is the excise duty payable for branded ready made garments and is CENVAT credit available.

Many thanks in advance.