CBEC clarifies – Dealer registration not mandatory for Sale in Transit

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Background:
Vide Notification
No. 8/2015-C.E. (N.T.), dated March 1, 2015, the following provisos were added
to Rule 11(2) of the Central Excise Rules, 2002 (“the Excise Rules”)

“Provided also that if the goods are
sent directly 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 person as the
consignee, and that
 person shall take Cenvat credit on the basis of the registered dealer’s
invoice
.


Provided also that if the goods
imported under the cover of a bill of entry are sent directly to buyer’s premises, the invoice issued by the importer
shall mention that goods are sent
directly from the place or port of import to the buyer’s premises.”

In view of the
newly inserted provisos, some field officers took the view that whoever orders
goods to the Manufacturer and directs the Manufacturer to send the goods to
ultimate user directly are required to take “Dealer’s” Registration. They
insisted that Cenvat credit will not be allowed on the strength of
Manufacturer’s invoice when the goods are sold through a Non-Registered Dealer.
This view was also
endorsed recently by the Joint Commissioner, Office of the Principal Chief
Commissioner of Central Excise, Mumbai Zone-I, who clarified that since Cenvat
credit will be available on Registered Dealers’ Invoice, hence registration of
Dealer with Central Excise is must from March 1, 2015.
Laudable Clarification issued by the CBEC:

The Central Board
of Excise and Customs (“the CBEC” or “the Board”) vide Circular
No. 1003/10/2015-CX dated May 5, 2015
 (“the Circular”) has
clarified that the new provisos are meant to improve the ease of doing business
by providing an additional facility to the Registered Dealer or Importer for
direct dispatch of goods from the manufacturer to the consignee, when he is
issuing Cenvatable invoice. They do not withdraw any past facility. These
amendments should therefore be harmoniously interpreted with the existing Rules
and Circulars in conformity with the legal provisions, keeping the intention of
the Government in mind.
The Board has
clarified as under:

“(i) Where a registered dealer
negotiates sale of an entire consignment from a manufacturer or a registered importer and orders direct
transport of goods to the consignee,
credit can be availed by the consignee on the basis of invoice issued by the manufacturer or the registered importer.
In such cases no Cenvatable invoice shall be   issued
by the registered dealer in favour of the consignee though commercial invoice can be issued. Where a registered
dealer negotiates sale of goods from the total stock ordered on a manufacturer or an importer to multiple
buyers and orders direct transportation
of goods to the consignees and the manufacturer or the importer is willing to issue individual invoices
for each sale in favour of the consignees for such individual sale, the same procedure shall apply.

(ii) Where a
registered dealer negotiates sale by splitting a consignment procured from a
manufacturer or a registered importer and issues Cenvatable invoices for each
of the sale,
 it
would now be possible for the dealer to order direct transport of the
consignments as per the individual sales to the consignee without bringing the
goods to his godown
. This would save time and transportation cost for
the dealer adding to ease of doing business.
 This is a new facility
which flows from the amended provisions.
 Procedure as prescribed in
the third proviso of rule 11(2) shall be applicable in such case.

(iii) Where a un-registered
dealer negotiates sale of an entire consignment from a manufacturer or a
registered importer and orders direct transport of goods to the consignee,
credit can be availed by the consignee on the basis of invoice issued by the
manufacturer or the registered importer. As the dealer is not registered, there
is no question of issuing any Cenvatable invoice by him. Such dealers as in the
past can continue to be un-registered.

(iv) Where goods
are sold by the registered importer to an end-user (say a manufacturer) who
would avail credit on the basis of importer’s invoice and the goods are
transported directly from the port or warehouse at the port to the buyer’s
premises, the amendment prescribes that for such movement the factum of such
direct transport to the buyer’s premises needs to be recorded in the invoice.”

The above stated
clarification has not only brought a sigh of relief for the Dealers, but has
also granted additional benefits like direct transport in case of split
consignments, an appreciating move of the CBEC towards “Ease of doing
business”
.
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