THE Central Government has issued Notification No. 08/2015-CE(NT) dated 01-03-2015, which is effective from the date of issue, has inter alia, inserted the following 3rd proviso in Rule 11(2) of Central Excise Rules, 2002 (CER, 2002)

“Provided also that if the goods are directly sent to any person on the direction of the registered dealer, the invoice shall also contain the details of the registered dealer as the buyer and the person as the consignee, and that person shall take CENVAT credit on the basis of the registered dealer’s invoice”

It has created a lot of confusion and worry in the minds of those manufacturers and dealers who receive goods directly, as consignee, from manufacturer through unregistered dealer (as buyer) and avail cenvat credit on the strength of invoice of supplier manufacturer. The proviso has also perplexed a large number of unregistered dealers who are being advised! instructed by their customers and others to obtain central excise dealer Registration if they wish to validly pass on the cenvat credit to customers. They are wondering why they are being forced to take mandatory registration when the same would become redundant very soon after the implementation of GST, which the Government has committed to bring from 01-04-2016.

In my view, the amendment has been made to facilitate trade and industry in view of the new policy of ‘Ease of doing Business’ as announced by our Prime Minister Shri Narendra Modi. Earlier, many registered dealers used to bring the goods in their registered premises simply for issuing Cenvatable invoice in case of transit sale. The amendment has facilitated such registered dealers, who need not physically bring the goods at their godown/depot and can directly dispatch the same from the factory/depot of the supplier manufacturer. This facility, which seems to be given to the registered dealers to reduce unnecessary transportation cost, cannot be interpreted to mean that purchase through unregistered dealer is not permitted. Also, the manufacturer or provider of output service receiving goods directly as consignee from supplier manufacturer though unregistered dealer can continue to avail cenvat credit on inputs as earlier. The reasons for my said view are as below:

1. The amendment is a beneficial provision given to First Stage dealer and Second Stage dealer. Rule 9(1) of Cenvat Credit Rules, 2004 (CCR) prescribes the eligible documents on the basis of which cenvat credit can be availed by manufacturer or provider of output service. One of the many eligible documents the invoice issued by manufacturer. Rule 9(2) ibid provides that the document (i.e. invoice in our case) should contain all the particulars as per CER, 2002.

2. Rule 11(1) of CER, 2002 provides that no excisable goods shall be removed from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent. Rule 11(2) ibid specifies the particulars that must be contained in any cenvatable invoice. The relevant portion is extracted below:

” (2) The invoice shall be serially numbered and shall contain the registration number, address of the concerned Central Excise, name ofthe consignee, description, classification, time and date of removal, mode of transport and vehicle registration number, rate of duty, quantity and value, of goods andthe duty payable thereon….

Provided also that if the goods are directly sent to any person on the direction of the registered dealer, the invoice shall also contain the details of the registered dealer as the buyer and the person as the consignee, and that person shall take CENVAT credit on the basis of the registered dealer’s invoice ‘…

3. It is clear from plain reading that the name of the consignee must be mentioned in the cenvatable invoice and so the consignee is the person entitled to avail cenvat credit and not the ‘buyer of goods’. To provide an exemption to this rule, the 3rd proviso has been inserted to provide that in case of transit sale, the details of ‘registered dealer’ as ‘buyer’ should also be mentioned in the cenvatable invoice.

4. The proviso is very specific and has limited application only for ‘registered dealers’. If an unregistered dealer is doing transit sale, he can continue to issue commercial invoice as earlier, as the proviso is applicable only when the goods are sent to any person on the direction of the registered dealer, which he is not.

5. In case of transit sale/E1 sale where the buyer is an unregistered dealer, the customer/end user can continue to avail cenvat credit on the basis of supplier manufacturer’s invoice, as earlier, if the invoice contains it’s name as consignee as provided in the sub rule 2. The manufacturers invoice showing recipient name as consignee is also a valid document for Cenvat as has been clarified in Circular No 96/7/95-CX dated 13-02-1995. The earlier procedure and law is still valid.

6. In addition to the ‘consignee’, the Central Government intended to allow ‘buyer’ to take credit by sending materials directly to consignee. Hence the newly inserted 3rd proviso to Rule 11(2) of CER, 2002 has provided an additional method for availing cenvat credit to BUYER, who should be a REGISTERED DEALER. The Hon’ble Rajasthan High Court had ruled that merely providing an alternative method or additional method for availing Cenvat Credit does not take away the entitlement to avail Cenvat credit on the basis of original document and the judgement has also been recently followed by Hon’ble Gujarat High Court.

Further, in my view, the last line in the 3rd proviso, which says and that person shall take CENVAT credit on the basis of the registered dealer’s invoice” seems to be ultra vires the Central Excise Act, 1944 or the rules thereunder and if challenged, may be struck down by the judiciary. In my view, if any trader, whether registered dealer or not, instruct his supplier to directly dispatch the excisable goods to the consignee, without first physically bringing the goods in his godown/depot, then such trader cannot issue valid cenvatable invoice even when he is a registered dealer. In view of the various issues involved, the Central Government should immediately issue necessary amendment or clarification to bring certainty and peace of mind to the trade and industry.

***

Manoj AgarwalAuthor    : Manoj Agarwal

Address  : Ganpati Campus, Lal Building Road, Rourkela – 769012

Contact   : +91-9937041788

E:mail      : ServiceTaxExpert@yahoo.com

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14 responses to “Transit Sale – Dealer Registration is not mandatory”

  1. VIHAR PATEL says:

    we are distributors. Our manufacturing unit in tamil nadu. Now we have to dispatch material in sez unit.
    what is the produre for it ?

  2. malaya santi says:

    Dear sir
    is it mandatory for excise registration for manufacturing of machines if turnover is 400 lakh for last year

  3. malaya santi says:

    Dear Sir
    we are manufacturing of machines as well as import , is it mandatory to registered in excise if out consul-dated turnover is 410 lakh

  4. VimalAnandan says:

    The department clarified this aspect vide their notification number Circular No. 1003/10/2015-CX Dated 05.05.2015… the existing practice will not be modified by the notification of March 2015..

    Source cbec.gov.in/htdocs-cbec/excise/cx-circulars/cx-circulars-2015/circ1003-2015cx

  5. Bajrang Sharma says:

    Thanks for the same, its indeed a good article and useful information for those who are into such transactions.

  6. Apurva Gandhi says:

    Dear Sir,

    We are not registered dealer of excise.

    Now we want to buy excisable material from excise register dealer (not as manufacturer but trader with excise registration) ,

    We also want to pass excise benefit to our customer.

    In this case does the dealer make bill with buyer as our name and consignee as customer?? can our customer get benefit of excise.??

  7. Rajesh,Mumbai says:

    Manojji,

    You were right in your interpretation though whole trade and industry and even Mumbai commissioner and officials in delhi could not understand and were confused.

    please continue posting your suggestions.

  8. Manoj Agarwal says:

    Good News for Manufacturers and Traders. CBEC issues Circular No. 1003/10/2015-CX dated 05-05-2015 to clarify that it is not mandatory for registered / unregistered dealer to issue cenvatable invoice in the case of transit sale. The consignee can still take cenvat on the basis of manufacturers invoice. Further, clarification is in respect of 3rd proviso of rule 11(2) of Central Excise Rules, 2002 is that Registration of Unregistered traders not mandatory, as earlier.

    As mentioned by me in my article, the clarification also says that “the new provisos are meant to improve the ‘EASE OF DOING BUSINESS’ by providing an ‘ADDITIONAL FACILITY’ to the registered dealer”.

  9. PRATEEK AGARWAL says:

    Dear Sir,
    I really appreciate your article on recent Central Excise Notification 8/2015, N.T.
    As you know that this notification has brings with itself lots of confusions in the mind of all the traders in the business association & also in the mind of professionals too, as because at one side this notification binds the registered dealers to issue cenvatable Invoice as a buyer by adding proviso to CER, 2002 but on the other side CCR, 2004 are silent on this matter.
    Considering all the situations and practicalities traders (i.e. in case when they are the buyers) to be on safe side already started to raise excise invoice in buyer-consignee transactions and transit/E-1 sales from 1st of April,2015.But,now the problem is that what will be the solution for March’2015 transactions, as how it will be possible for traders (i.e. as buyer) to raised excise bills for the month of March,2015 as this notification is effective from 01.03.2015,but has come to be notice of all the traders and manufactures on and around 1st week of April,2015.
    Now the situation is that there is no clarification by Government on this matter till yet, but the consignees who are also the ultimate consumers of goods to be on safe side started demanding Excise Invoice from the buyers end for the month of March’15 also, so that department will not disallowed there Input Credits of Excise duty. But, how this will be possible for the buyer to raised Invoice for the month of March’15 as they have already closed their books for the F.Y:2014-2015 and also has filed the Excise Return for the same.
    To be a trader, i am also in this situation and have no solutions for such case that how to raised Excise Invoice for the month of March’2015, as i has also closed my books for the F.Y:2014-15 and has also filed the Excise Return for the same. So, it will be a great helping hands from your side if you will wright some article on this matter of “how to solve the March, 2015 Excise Invoicing practical problems” instead of putting facts on the law’s provisions only and not on the practical aspects of its.
    Hope you will appreciate my reply and surely will throw some light on these practical issues.

    Thanking you,

    PRATEEK AGARWAL
    Mob: +91-9438090901
    Rourkela (Odisha)

  10. Vinayaka Electrix says:

    Dear Sir,

    I am trader not registered with central excise. I purchase the goods from the dealers (both 1st stage and 2nd stage dealer) and supply the same to my customers. Hereto I was issuing my invoice along with the gate pass of the dealers (1st stage & 2nd stage).

    I do not have a godown as i supply the goods directly from the dealers godown to my cusotmers and the goods does not come to my premises.

    As per the present notification, a couple of my costumers have advised me to get myself registered with the central excise. I spoke to a couple of excise consultants, who opined that I have to get myself registered with the Excise department and also should have a godown.

    Please advise me how to go about and is it necessary for me to get myself registered with central excise, which frankly speaking I can not afford as I have to hire a godown and appoint am excise consultant.

    Please advise.

  11. CMA ASIM SAHA says:

    I think distinction between Registered dealer and consignee is required. In plain reading Consignee means who will receive the goods. If the consignee is unregistered either with Central excise or in state VAT / CST then how he can get the Cenvat credit or input credit as per VAT Act of the respective VAT ACT

    “Provided also that if the goods are directly sent to any person on the direction of the registered dealer, the invoice shall also contain the details of the registered dealer as the buyer and the person as the consignee, and that person shall take CENVAT credit on the basis of the registered dealer’s invoice ”

    The amendment is silent about the ultimate / end consumer. The registered dealer here can not be buyer but simply a trader only

    asah456

  12. manish says:

    I overlooked the word “regd dealer” and agree that said proviso has limited extent. good good article. thank you very much

  13. Kalikant Mishra says:

    Dear Sir,

    As discussed, please inform us duty of HSN code is 84463011 ( Product Name- Weaving Machine Automatic) under RR tuff.

    Requesting to you please do the needful on urgent basis.

    Awaiting for your reply.

    Thanks & Regards.

  14. v.rmadoss says:

    Dear Sir
    It is nice to have your comments. kindly let us have your comments on the following point.
    Mfrs to first point dealer and then the second point dealer can get items in modvat invoice from first point dealer and take input and pass on excise benefits to end users. Is it possible in order to have end users landing cost will be reduced and second dealer become competitive.Is it possible the second dealer can pass on modvat invoice to end user.?

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