Cenvat credit on inoivces issued by Third Stage Dealer
Cenvat credit admissibility is based purely on the invoices issued in this regard. The invoice can be issued by the manufacturer or by the dealers registered as dealers under Central excise. The chain of dealers permitted to pass on duty credit is upto second stage dealer only. If goods are sold by the third stage dealer then Cenvat credit could not be passed further. Here we are discussing the mechanism of transfer of Cenvat credit by the third stage dealer in the light of recently decided case.
The fact of the case is that the assessee availed of Cenvat credit on the strength of invoices issued by second stage dealer, however the input was purchased from an agent of said second stage dealer. The department disallowed the Cenvat credit so availe of on ground that the firm from whom assessee had purchased inputs was third stage dealer and on procurement of input from third stage dealer, Cenvat credit is not admissible. Accordingly, the assessee was asked to reverse the Cenvat credit availed of and revese the same.
The assessee submitted that it had availed of Cenvat credit on the strength of invoices issued by second stage dealer, in the said invoices assessee’s name was appearing as consignee therefore irrespective of the person from whom input was purchased but duty paying documents is consigned to the assessee, credit was admissible. The Cenvat Rules provides the credit is available on the invoices issued by first stage dealer or second stage dealer. In the present case, credit taken on the invoice which was issued by the second stage dealer and not by third stage dealer, irrespective of purchase was made from agent of the second stage dealer. He submits that the issue is no more res integra as the same has been decided in various judgments as Commr. of C. Ex., Ahmedabad-II v. Transformers & Rectifiers (India) Ltd. [ 2012 (11) TMI 562 – GUJARAT HIGH COURT ], Kunststoff Polymers Ltd. v. Commissioner of C. Ex., Bhopal [ 2009 (5) TMI 743 – CESTAT, NEW DELHI] and also by way of clarification in circular C.B.E. & C. Circular No. 218/52/96-CX, dated 4-6-1996 on “Modvat on transit sale”. and Relevant text of C.B.E. & C. Circular No. 96/7/95-CX, dated 13-2-1995 on “transit sale”.
Discussion and Decision
On careful consideration of submissions presented, it was found that the invoices on which Cenvat credit was availed were admittedly issued by second stage dealer and the name of the assessee is appearing on the said invoices as a ‘consignee’ of the goods. As per the invoices, buyer of the goods was the agent of the second stage dealer who supplied the inputs. Even if the purchase of the same inputs were made by the assessee from an agent of the second stage dealer but duty paying invoices is consigned to the appellant, credit is legally admissible to the appellant. This position has been clarified by the Board Circular way back in 1995 vide Circular No. 96/7/95-CX, dated 13-2-1995. Relevant para of the circular is reproduced below :
“1. A registered person places an order on a manufacturer for supply and delivery of goods directly to a consumer and the goods are accordingly transported from the manufacturer’s premises to the user’s premises without being brought to the registered person’s premises. In such a situation manufacturer will issue an invoice under Rule 52A. This invoice under Rule 52A will contain, in addition to the prescribed details including the consignee’s name and address, mentioned therein, the registered person’s name and address, on account of whose instructions the goods have been dispatched. The consignee in this case will be the end user. In such a situation the registered person’s invoice is not required for availment of Modvat credit. The duplicate copy of the manufacturer’s invoice under Rule 52A will serve as cover for transport and for availment of Modvat by the end user.”
Further, on the similar issue in the case of Commr. of C. Ex., Ahmedabad-II v. Transformers & Rectifiers (India) Ltd. [ 2012 (11) TMI 562 – GUJARAT HIGH COURT ](supra) and Kunststoff Polymers Ltd. v. Commissioner of C. Ex., Bhopal [ 2009 (5) TMI 743 – CESTAT, NEW DELHI] (supra) has held that credit on invoices issued by first stage or second stage dealer, wherein recipient’s name is appearing as consignee is admissible for Cenvat credit. The issue being settled as per the Board Circular as well as the ratio of the above referred judgments.
In accordance with the clarification reproduced above, it is very clear that if in the invoices end user’s name is appearing as consignee irrespective of fact that sale purchase transaction is not between the supplier of inputs and the end user, the credit is admissible at the recipient’s end.