Transit Sale - Amendment to Rule 11-A(2) of the C.Ex.Rules, 2002 - Effect on unregistered dealer

[Mukund Nyalkalkar]

It appears that, in some transactions, the customer places orders with the agent/dealer(who are not registered with the C.Ex.department as registered dealer) for supply of particular goods against agreed charges. The said agent/dealer, in turn, places order with the manufacturer or registered dealer and the said manufacturer/registered dealer are supplying the said goods directly to the said customer by showing the name of the agent/dealer as “the buyer/customer” and the name of the customer as “consignee”. The said agent/dealer is issuing his commercial invoice to recover his agreed charges. The said customer is availing the credit on the basis of the C.Ex.invoice issued by the manufacturer/registered dealer.

 

[2] Now, due to amendment made to Rule 11(2) of the C.Ex.Rules, 2002 vide Notification No.8/2015-CE(NT), dt. 1.3.2015, there is confusion amongst trade and industry as to whether such agent/dealer are liable to obtain the registration as C.Ex.dealer and then has to issue their C.Ex.invoice so that the customer can take credit only on the C.Ex.invoice of the said agent/dealer.

 

[3] For clarity, I am reproducing herewith the said amendment, -

 

“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 :”

 

[4] Please note that earlier the registered dealer was required to first bring the consignment to his premises and then to enter the same in his RG-23D register and then to dispatch the same to his customer under his C.Ex.invoice.

 

However, it appears to me that, as a procedural relaxation, the above said beneficial provision has been made specifically in the C.Ex.Rules, 2002 itself.

 

[5] I herewith inform you that exactly in similar facts and circumstances, similar procedural relaxation was extended to the registered dealers by the Board vide it’s Circular No.96/7/95-CX., dt.13.2.95 and at that time also the C.Ex.department was of the view that if the agent/dealer(which were not registered with the C.Ex.department as dealer) wants to do the similar activity, then he has to obtain the C.Ex.registration as C.Ex.dealer. However, the Board vide it’s Circular No.218/52/96-CX., dt.4.6.96 has specifically clarified that, -

 

“The matter has been examined by the Board. I am directed to say that as the movement of goods in such cases will take place on the manufacturer’s invoice issued under the Rule 52A which will also be treated as a valid duty paying document and no separate invoice under the provisions of Rule 57G is required to be issued in such cases, such persons taking part in transit sale need not get themselves registered.”

(Emphasis supplied)

 

Please note that the said clarification will also equally applicable to the agents who are taking part in transit sale through registered dealer.

 

Please also note that, according to me, the said circular is issued in similar facts and circumstances and there is no drastic difference between legislature intention behind Rule 57-G and present Rule 11 and hence the said Circular will be applicable also to the provisions of Rule 11 of the C.Ex.Rules, 2002 by virtue of the provisions of Rule 33 of the C.Ex.Rules, 2002(i.e.transitional provision) under which it is provided that any notification, circular, instruction, standing order, trade notice or other order issued under the erstwhile C.Ex.Rules shall, to the extent, it is relevant and consistent with the present C.Ex.Rules, 2002, be deemed to be valid and issued under the corresponding provisions of the rules.

 

[6] If all the above said provisions/Circulars are read together, then it appears to me that it is not at all the intention of the Government to amend the provisions of Rule 11(2) of the C.Ex.Rules, 2002 so as to compel such agent/dealer to obtain the C.Ex.registration as registered dealer in the above said transaction.