Procedure for Job Work for a Trader

[SRIVATSAN RAJAN]

I import Steel Coils from China, give them to a factory to convert them into pipes. I hold only a "Dealer" registration under Central Excise. Since I am not a "Manufacturer" under Central Excise I can not avail the benefit of Notification 214/86. At present I sell the imported coils to the factory on High Seas Sales basis and purchase the finished steel tubes from them, which results in payment of VAT (4%) to them. Since I sell the tubes on CST basis, the rate is only 2%, I lose 2% on Sales tax. Further there is a hassle of  HSS Sale of coils, sales of pipes etc. Can anybody suggest an easier way to handle this matter. Can the factory take credit of CENVAT available on my Bill of Entry and use it against the CENVAT payable for my finished goods.

AI Summary

Cenvat credit for imported inputs may be taken by job worker or routed via first-stage dealer to mitigate tax loss.
A trader who is a Dealer not Manufacturer cannot use manufacturer benefits; recommended operative approaches are: (1) deliver imported coils to the job worker under the prescribed challan so the job worker can opt to pay excise at job completion and claim Cenvat Credit, allowing return of finished goods without separate VAT/CST; (2) import directly in the job worker's name so the job worker can take Bill of Entry credit (requires IEC and payment of customs duty); or (3) import in the trader's name and pass input value via a First Stage Dealer invoice reflecting transfer of possession.