Central excise on branch transfer

[Asked by Guest]

We are having manufacturing plant at Gujarat where we manufacture textile machine. Certain parts of machines are manufactured, some are procured and some are imported. We would like to keep some spare parts at Tamilnadu to serve the customer of south region. If we are making branch transfer what is the impact of central excise on these parts which are manufactured in the plant, procured from local vendor and imported from out of India. If we have taken cenvat credit on local purchased how it is to be dealt.

[KASTURI SETHI]

Concept of stock-transfer is not applicable in the situation described by you. Regarding bought out items and imported spare parts, Cenvat Credit has to be reversed as it is removal of inputs/parts/components as such.

Regarding removal of parts manufactured in the factory, you will have to clear the same on payment of CE duty.

Dear sir

Thank you for your clarification. Would like to know can we pass on the Cenvat credit to our customer when it is sold to customers for all these kind of parts

[Himansu Sekhar]

The credit reversedf when the goods are transferred to your sister unit can be taken as credit there. Also the duty paid in the case of manufactured goods can be taken as credit there. The pre condition is that the other unit should be a manufacturing concern.

[KASTURI SETHI]

I think here is not a manufacturing sister concern.

[Himansu Sekhar]

If the sister concern is not a manufacturing concern, the scope of taking credit on the capital goods diminishes as the credit can not be utilised.

[Ganeshan Kalyani]

The input used in manufacturing excisable goods is an eligible credit. Excise duty is payable on removal of goods from factory. If the goods are stock transferred to your own location in another state and subsequently if the goods are supplied to customer from location and if the customers are manufacturer then the location can pass on the credit. Otherwise cannot.

If input purchased in the factory is removed as such the propotionate Cenvat credit is required to be reversed.

Kindly clarify my understanding is correct:

1. In case of manufactured parts transferred to our location in other state : Excise is to be charged and if parts are sold to customer (manufacturer) then same Cevat can be passed on to customer

2. In case of local bought out parts transferred to our location in other state: The cenvat credit taken is to be reversed. Excise is to be charged and same can be passed on to customer when sold.

3. In case of imported parts transferred to our location in other state: CVD & AED credit taken is to be reversed. Excise to be charged and same can be passed on to customer when sold.

AI Summary

Cenvat credit reversal on branch transfers: excise payable on removals; credit usable only if recipient is a manufacturer.
Removals of parts from the factory for transfer to another state attract excise: manufactured parts must be cleared on payment of excise, bought-out inputs removed as such require proportionate Cenvat credit reversal, and imported parts require reversal of customs-related credit. If the receiving location is a manufacturing unit, reversed credit or duty paid may be taken as credit there; if not, credit utilisation is restricted.