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Is it compulsory that the inputs / capital goods are to be purchased from the manufacturers for availment of credit

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Garima Pal asked about 3 years ago

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4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered almost 3 years ago

(i) the manufacturer under the cover of an invoice issued in terms of the provisions of Central Excise Rules, 2002 or from the depot of the said manufacturer, or from premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer, under cover of an invoice; or It is clear from the definition that anybody who purchases the goods directly from the manufacturer under the cover of an invoice issued within the meaning of the Central Excise Rules is a first stage dealer. Purchase or Sale has been defined under Section 2(h) of the Central Excise Act,1944 as “sale” and “purchase”, with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration;”

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Mukesh answered about 3 years ago

Firstly let us take the issue. It relates to the concept of transit sales. Say for example, “X” purchase goods from a manufacturer and sell to say “Y”. The goods are directly dispatched to “Y”, and “X” is an intermediate person. The question is whether “Y” is a first stage dealer? It is possible that “X” sells it to “A”, who sells it to “B”, who in turns sells it to “C”, who later sells to “Y” and goods are directly dispatched to the “Y” from the manufacture’s premises. In other words when there are more than one, say 5 intermediate persons before the goods are dispatched to “Y”. The issue is again the same, “whether the “Y” is a first stage dealer?” The invoice clearly shows that these persons are the purchaser from the manufacturer. A first stage dealer has been defined in the Rule 2(ij) of the Cenvat Credit Rules, 2004[earlier Rule 2(f)] as, “first stage dealer” means a dealer, who purchases the goods directly from, – (i) the manufacturer under the cover of an invoice issued in terms of the provisions of Central Excise Rules, 2002 or from the depot of the said manufacturer, or from premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer, under cover of an invoice; or It is clear from the definition that anybody who purchases the goods directly from the manufacturer under the cover of an invoice issued within the meaning of the Central Excise Rules is a first stage dealer. Purchase or Sale has been defined under Section 2(h) of the Central Excise Act,1944 as “sale” and “purchase”, with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration;” It may be noted that sale or purchase under Central Excise means transfer of possession. It doesn’t refer to sale or purchase within the meaning of the Sale of Goods Act. In this particular case the possession is being directly transferred to “Y” from the manufacturer. Hence “Y” is the purchaser from the manufacturer within the meaning of Section 2(h) of the Central Excise Act. And since “Y” is Purchasing (transfer of possession) the goods directly from the manufacturer under cover of Rule 11 invoice, he is a first stage dealer within the meaning of the Rule 2(ij) of the Cenvat Credit Rules. The contrary contention that “X”, the intermediate person is a first stage dealer is erroneous and based on misunderstanding of law. Since possession has never been transferred to “X”, he has never purchased the goods within the meaning of Section 2(h) of the Central Excise Act, 1944 and as such he is not a dealer at all. It may be noted that to become a dealer, either first stage or second stage, purchase (transfer of possession) is a must. A person who never got the possession of goods cannot be treated as purchaser of goods in the Central Excise. The CBEC Circulars No. 96/7/95-CX., dated 13-02-1995, 137/48/95-CX., dated 18-7-1995, Circular No. 218/52/96-CX, dated 4-6-1996, Pune Commissionerate Trade Notice No. 76/95 dated 20-07-1995, Vadodara Commissionerate Trade Notice No. 8/95 dated 27-1-95 etc. deals with this question and provides some of the guidelines related to the issue. All these circulars and trade notices reflect correctly the law laid down under the Central Excise Act, however they are not explicit with respect to the legal basis of the stand taken. This may be a cause of the confusion prevailing in the field formations.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Aarti Vadnerkar answered about 3 years ago

Dear, One can purchase inputs and capital goods from First stage and second stage dealers who are registered with Central Excise for availment of cenvat credit,. It is not necessary that one must purchase it from Manufacturers only

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Open uri20170510 32134 s5bvk0?1494421637 ARJUN PRATAP SINGH answered about 3 years ago

Dear Friend, as far as your query is concerned that Is it compulsory that the inputs / capital goods are to be purchased from the manufacturers for availment of credit Let me informed that No. The inputs/capital goods can be procured from the First stage and Second stage dealers also. Those dealers should have registered themselves with the Central Excise Department. The invoices issued by them should contain proper details about the payment of duty on those goods Hope answer was helpful to you Regards, Arjun Pratap Singh

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