Trading & Manufacturing Sale

[Ramesh M]

Dear Experts,

We are manufacture of Fire Fighting System and existing central excise registered, we received order from our customer to Design, Supply, Erection of Fire Fighting System as a single entity. For Supply 1 Cr and Erection 20 Lakhs mentioned seperately in the same purchase order.

We will manufacture core unit in our factory and balance 60% of material will be by in market as bought out component as per our design specification.

In view of above, i want to clarify from you

1) Can we despatch our bought out components directly from our vendor place to our customer (LikeTrading)

2) Is there any objection from Central Excise Department

3) Single order can we split into two i) Manufacturing Sales ii) Trading Sale

4) When i design the equipment, can i split into two type of sales

Ramesh M

AI Summary

Direct supply of bought out components may be permitted but forfeits cenvat credit and composite orders remain single supplies.
Vendors may directly supply bought out components to the customer on the manufacturer's behalf, provided those supplies are not identical to the final manufactured product; excise authorities generally raise no objection but the manufacturer cannot claim cenvat credit for inputs not received into its factory. A turnkey contract combining manufactured components, bought outs and erection charges should be treated and invoiced as a single composite supply and should not be split into separate manufacturing and trading sales.