FG material transfer from Processor(Manufacturer) to Factory (Manufacturer)

[Guest]

Dear Sir,

Please explain can we clear Finished goods from our processor i.e. Job worker to our factory on payment of duty and further can we avail Cenvat credit of the same.Thanks and regards.

[MUKUND THAKKAR]

First clear on which documents are sending goods to your job worker ?

if you are sending raw material on basis of job work challan in case need not required to pay excise duty by your job worker.

if your job worker sending finish goods to you with the payment of excise duty. In such situation you are not Eligible to take credit.because as per cenvat credit rules you are eligible to take credit on raw material or capital goods. if you are not doing any further process on the same .

if you are carried out any further process in such event are you eligible for credit .

In case of return (sales return ) goods you are eligible to take cenvat credit.

please check your Transaction and act accordingly to avoid any litigation.

[KASTURI SETHI]

I support the reply as well as crucial cross queries raised by Sh.Mukund Thakkar, Sir.

[YAGAY andSUN]

Duty liability in case of Job Work: Even in case of job work, the duty liability is of actual manufacturer and not of the raw material supplier. – CCE v Global Auto Agency 2003 (157) ELT 202 (CESTAT). =  2003 (8) TMI 264 - CESTAT, MUMBAI However, a job worker manufacturing goods under Notification No. 214/86-CE is exempted from excise duty, as the raw material supplier undertakes that he will use these goods further to manufacture final product or clear for export or pay duty on such goods.
Job worker can pay duty even if material sent under CENVAT: Normally, job woker is not required to pay duty, if material is sent under CENVAT provisions. However, in some cases, he may like to pay duty, if –
1. He has put his own inputs
2. He has utilized CENVAT credit.
If work done by job worker is not pure job work and he uses substantial amount of his own material, then, in our view, the job worker should pay excise duty on the intermediate product. CENVAT credit can be availed accordingly.

[KASTURI SETHI]

Sh.Shinde Ji,

There are conflicting case laws on the issue depending upon facts of each case. Here you are talking about clearance of finished goods manufactured on job-work basis on behalf of principal manufacturer and not intermediate products.

AI Summary

Cenvat credit eligibility depends on whether finished goods from a job worker are further processed or duty conditions are met. Clearance of finished goods from a job-worker to the principal manufacturer on payment of excise duty raises questions about duty liability and Cenvat credit entitlement; the principal remains the liable manufacturer, exemptions may apply under notification where the principal undertakes specified use or duty payment, and credit availability depends on whether further manufacture occurs and whether the job-worker used substantial own inputs or Cenvat credit in producing the goods.