CENVAT Credit Admissibility on Invoices Raised for Removal of Inputs ‘as such' – Board to Decide
It has been brought to the notice of the Board that some manufacturers, especially of iron & steel products, purchase inputs, take CENVAT credit and then sell the inputs after reversing the credit. The sale of such inputs is made to ‘dealers', who once again sells it and passes on the credit.
Some field formations have taken the view that a ‘dealer' cannot receive goods from manufacturer who clears the ‘inputs as such' by reversing the credit. In this process, inputs are rotated number of times by passing the restriction up to two stages for the dealer.
To illustrate, TISCO sells goods to a dealer, who sells it to a second stage dealer, who sells it to a manufacturer, who in turn clears the ‘inputs as such' and sells it to another dealer and so on. This practice, in view of few field formations is against the provisions of law.
As per Rule 2(ij) of CCR, 2004, a first stage dealer should purchase goods directly from manufacturer and it means the goods manufactured by a manufacturer. The inputs cleared as such under Rule 3(5) of CCR, 2004 are not eligible for purchase by a dealer. Therefore, in their view, a dealer cannot purchase ‘inputs cleared as such' under Rule 3(5) of CCR, 2004.
Board realises that this issue has wide ramifications and so wants the Chief Commissioners to give their considered views.
CBEC F.No.267/61/2008- CX.8 Dated: 5.12.2008