Cenvat credit provisions for transfer of raw material from trading unit to manufacturing unit

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Dear Experts, A company has two units, one is trading unit (i.e. it purchases raw material from outside India and sells it as it is as a first stage dealer) and the other is a manufacturing unit (i.e. which manufactures finished goods and then sells it under a cover of excise invoice). I want an advice in respect of one of the transaction executed by the company. The company has transferred raw material from its trading unit to its manufacturing unit under a cover of first stage dealer invoice and has passed on credit of CVD and SAD in its invoice to the manufacturing unit. The question arises that whether the manufacturing unit can take the Cenvat Credit of the duties passed on by the trading unit or not? Kindly support your suggestions with relevant rules and sub rule. Best Regards, Dhrunil Bhatt
Replies (4)

Yes. Credit can be availed. kindly give reasons why not available. As far as manufacturing unit has a separate excise regstration and using such inputs for manufacturing of excise able goods, it is eligible to avail credit on inputs procured from a registered dealer who has passed on the credit.

There could be valuation issues as it is a related party transaction.

Dear Nagendra,

Thanks a lot for your reply.

I was of a same opinion that the manufecturing unit can avail the cenvat credit of CVD and SAD on goods procured from a trading concern. However the confusion arose because there is no such specific provision in the Rules for such transactions.

So, if the trading concern transfers the material at an arms length price to a manufecturing concern, then there is no ambiguity as to availment of cenvat credit. Credit can be availed

Can I know Mr. Nagendra that in case if the transfer is made at a price otherwise than at an arms length price, whether there would be any impact on the amount of cenvat credit that can be availed ?

Once again I thank you for your prompt reply.

Best Regards,

Dhrunil Bhatt

There should not be any impact on credit. where as isse on valuation could arise on trading unit

Thanks a lot !!


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