Availing of cenvat credit

[ASHOK AMIN]

Dear Experts,

We are a manufacturing unit and also have trading unit separately. We imported 10 items, 2 for our manufacturing and 8 for trading unit which we received under one invoice from them and bill of entry. Now my querry is can we avail cenvat credit only on the 2 items which is combined with the trading items, since we are not availing the cenvat credit of the trading items. Is it permissible to take cenvat credit of the 2 items as per law ? What will be its adverse effect if the audit party later on comes to know about it ?

[KASTURI SETHI]

There is no problem in availing credit on two items. No problem can be created by audit when you fulfill all the conditions. What you think is unfulfilled ?

[ASHOK AMIN]

Dear Sir,

We are of the view that we wont be able to avail cenvat credit on the two items because there are other 8 items of trading on which we will not avail the credit, and, since the original documents (cenvat copy) will be kept in the manufacturing unit they will ask about the other 8 items of trading which is stored in the trading department. They may further ask how can we avail cenvat credit of the 2 items whereas other 8 items of trading are mentioned in the same bill of entry. Please clarify.

[KASTURI SETHI]

There will be no such problem especially in view of origin document is with you. If 8 items are in one bill of entry, it does not debar you to take credit on two items meant for manufacturing unit. Nothing to worry about. Since problem does not exist, so why to ask for clarification or solution ?

[Himansu Sekhar]

Kasturi sir is correct. There is no problem in taking credit on two items. Moreover these items enter into the manufacturing process

[ASHOK AMIN]

Thanks for the reply sir. But, here i would like to say one more thing that all the items are similar and as per my knowledge we cant do trading and manufacturing in the same premises. Here we are having a separate premises but, the products are similar. Hence the doubt arised in my mind.

[KASTURI SETHI]

Yes You cannot do trading of similar goods from manufacturing premises. Bill of entry is addressed to your unit and you are to keep original bill of entry in your manufacturing premises and photocopy for other six items in trading premises. Since both are yours, there will be no legal or technical problem. At the time of audit of trading premises you can show your original copy to them. In this regard, the department is liberal provided there must not be evasion knowingly or unknowingly. When your stock and record are may and clean and in order. Nothing to worry.

[ASHOK AMIN]

Thank you all for your valuable reply. The explanation sufficed my querry. Thanks to all once again.

[DR.MARIAPPAN GOVINDARAJAN]

It is a good practice to thank the experts while the query is clarified.

AI Summary

Cenvat credit entitlement: allowed for imported inputs used in manufacture though invoice includes trading goods, subject to records. Cenvat credit may be availed on imported items used in manufacturing even if the same bill of entry lists trading goods, provided the manufacturer retains original import documents, maintains clear segregated records evidencing which items enter production, uses photocopies for the trading unit as needed, and ensures no evasion or prohibited trading from the manufacturing premises.