same inputs used for manufacture and processing

[Dalia Felix]

We are registered with the Excise department as 'manufacturer of excisable goods'. It is also possible to conduct certain processes not amounting to manufacture on the inputs purchased and clear them at a higher price. We generally take full cenvat credit of the excise duty paid on purchasing the inputs. Thus, common inputs are used for the manufacture of excisable goods and also removed after partial processing.

Thus, inputs are not 'cleared as such'; but after partial processing. Since the processing does not amount to manufacture, excise duty is not collected.

What is the amount of excise duty to be reversed when the partially processed inputs are removed?

What are procedures to be followed so that the excise duty paid on the inputs are available to us or the purchaser (of the value added inputs) as CENVAT Credit?

What about the applicability of Rule 6 of CENVAT Credit rules on these types of transactions?

AI Summary

Service tax on processing may apply where processing is not manufacture; CENVAT reversal or separate account options follow.
Processing that does not amount to manufacture is treated as rendering a taxable service and attracts service tax; if service tax is paid on the processed inputs, a CENVAT reversal for that processing need not be made. Where common inputs are used for both manufacture and non-manufacturing processing, taxpayers may either maintain separate accounts, reverse input credit proportionately, or opt for an excise-duty-based alternative for exempted removals to determine CENVAT credit availability.