CAN FORMULATION MANUFACTURER DO RAW MATERIALS TRADING ACTIVITY

[nandankumar roy]

POINT 1.WE ARE THE MANUFACTURER OF MEDICINE BUT NOW WE WANT PURCHASE RAW MATERIAL FROM MFG ON BILLING AND CONSIGNEE BASIS AND AFTER THAT WE WANT TO SALE THE SAME MATERIALS AND RAISE INVOICE TO ANOTHER PARTY . PL HELP OR ADVICE WHETHER IT IS POSSIBLE TO US WHAT WILL BE EXCISE LITIGATION FOR THAT WE HAVE TO FOLLOW. PL HELP

POINT 2 WE ARE THE MANUFACTURER OF MEDICINE BUT ABC PARTY WILL SUPPLY TO XYZ ON DELIVERY ADDRESS AND CONSIGNEE WILL BE MICRON PHARMA AND MICRON PHARMA WILL RAISE COMMERCIAL INV TO XYZ . PL CONFIRM WHETHER IT IS POSSIBLE AND IF POSSIBLE WHAT WILL BE EXCISE ANGEL POINT OF VIEW. PL HELP

[MUKUND THAKKAR]

Dear Roy,

in both cases you just procuring the material and trade as it is. as manufacture you just clear as such. no addition consideration is allowable by paying Higher excise duty.

[Rajagopalan Ranganathan]

My dear Mr. Roy,

For Point No.1, you can sell the raw material to a third party under you commercial invoice. But be cautious that the raw material purchase for manufacture of your final product and the raw material purchased for trading purpose are not mixed up. You have to maintain separate accounts for the respective activity. If you want to pass on the duty paid in the traded goods to your customer, then you have to take a dealer's registration for which you should provided a separate storing place.

Regarding point No.2, I presume that ABC is manufacturer of the raw material and XYZ is your job worker. Under CENVAT credit rules ABC can send the material directly to XYZ and after processing the material XYZ can send the same to you along with the invoice issued by ABC. Normally ABC will issue both original and duplicate invoices. While the material will be sent to XYZ under duplicate invoice original invoice will be sent to you. However you can take the credit if duty paid on the material sent to XYZ only after you have received the same from XYZ. However, from 1.9.2014 you can take credit within 6 months from date of invoice. Therefore ensure that XYZ is returning the material after processing the same within 6 months from the date of invoice. Otherwise you will loose the credit.

AI Summary

CENVAT credit rules require manufacturers to separate trading and manufacturing stocks and ensure timely job-worker returns to claim credit. Manufacturers may trade raw materials but must maintain separate accounts for traded and manufacturing stocks; dealer registration and separate storage are required to pass duty in traded goods. For direct delivery to a job worker, invoices (original/duplicate) may be used, but CENVAT credit on duty-paid inputs is claimable only after receipt from the job worker and within the statutory time limit, so timely return is necessary to preserve credit.