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

Cenvat Credit restriction: credit disallowed on traded spare parts and invoices invalid without dealer registration.
Manufacturer cannot claim Cenvat Credit on spare parts that were purchased and cleared as traded goods because such inputs were not used in or in relation to manufacture of the dutiable final product. Issuance of cenvatable invoices for those spare parts is invalid unless the seller is registered and authorised as a dealer in excisable goods; credits erroneously availed should be reversed with interest. Where service tax on reverse charge was paid under a different legal entity/PAN, credit cannot be claimed by the manufacturer unless the same legal entity made the payment; such PAN/registration mismatches are procedural lapses if no revenue loss.