Trading of goods by manufacturer after availing cenvat credit and issuance of cenvatable invoices

[Bal Krishan]

We are manufacturing of packing machine and registered with the central excise department. We cleared the machines under central excise after payment of duty. We also purchase spare parts on payment of duty as well as without payment of duty and after availing the cenvat credit of spare parts in case of duty paid spare parts we clear the same to different buyer on payment of appropriate Central Excise duty in all cases. We are not having any manufcturing facility for manufacture of spare parts. We can manufacture/assemble only packing machine. Now our Audit is going on and auditor objected that we can not avail the cenvat credit in respect of spare parts as these are not our inputs( for manufacture of machine) and credit is allowed in respect of inputs used for manufacturing of machine only. They further objected that we can not issue cenvatable invoice as a manufcturer because the spare parts have not been manufactured by us and moreover there is no facility for manufacturing of these spare parts. We have not taken any permission for trading of goods from the department. The Auditors disallowed the cenvat credit availed on spare parts which was traded by us without doing any work on it. They are also going to disallow the cenvat credit to our buyers also stating that we had issued invoices without having manufacturing facility. please guide whether the contention of auditor is correct

AI Summary

Packing Machine Firm Advised to Reverse Cenvat Credit on Traded Parts; Issues with Unregistered Invoices and PAN Transition. A manufacturer of packing machines, registered with the Central Excise Department, faced audit objections for availing Cenvat credit on spare parts not used in manufacturing but traded. The auditor argued that Cenvat credit is only permissible for inputs used in manufacturing the final product, and trading does not qualify. Additionally, the firm issued cenvatable invoices without being registered as a dealer, which is against Central Excise rules. The firm also faced issues with using different PANs for excise and service tax registrations after transitioning from a partnership to a proprietorship, complicating tax credit claims. The advice given was to reverse the credit with interest to avoid penalties.