CENVAT Credit on Invoices Issued by Importer - Amendments to Rules
THE Central government has amended the Central Excise Rules, 2002 in the following manner. These amendments would become operational with effect from 01.03.2014.
Rule 9(1) at present reads -
(1) Every person, who produces, manufactures, carries on trade, holds private store-room or warehouse or otherwise uses excisable goods, shall get registered:
The proposed amendment would result in the following -
(1) Every person, who produces, manufactures, carries on trade, holds private store-room or warehouse or otherwise uses excisable goods or an importer who issues an invoice on which CENVAT Credit can be taken, shall get registered:
Why should an importer who issues an invoice on which CENVAT credit can be taken get registered?
This is a long story and correction of a 12 year old mistake. The basic question is can CENVAT Credit be taken on an invoice issued by an importer? As per Rule 9(a)(ii) of the CENVAT Credit Rules, 2004, an invoice issued by an importer is a valid document for taking credit - but should the importer get registered as a dealer and is he required to enclose a copy of the Bill of Entry along with his invoice? Can he issue several invoices for one Bill of Entry? Who will verify whether he is passing on more credit than the CVD he paid? And what happens if he does? The Department usually adopts the easy method - deny credit.
Go back to history - twelve years - when we had the Central Excise Rules 1944 - let us see some of the provisions:
Central Excise Rules 1944 | Central Excise Rules 2002/CENVAT Credit Rules 2004 |
|---|---|
Rule 174: registration: A person issuing an invoice under Rule 57AE was required to get registered. As per Rule 57AE an invoice issued by an importer under Rule 52AA was an eligible document for taking CENVAT Credit. 52 AA specified the procedure for issuing invoice. So an importer who wanted to issue a cenvat table invoice had to get registered and follow the procedure under Rule52AA. | Rule 9: registration: No requirement of registration for a person issuing invoice. An importer issuing an invoice is not required to get registered. |
Of course there are other minor complications like First and Second Stage dealers. Even before this concept of registered dealers was introduced, Modvat Credit was allowed on the triplicate copy of the Bill of Entry or an endorsed copy.
Recently the Finance Minister had constituted a Forum under the chairmanship of his adviser Dr. Parthasarathy Shome. The Forum brought to the notice of the FM certain difficulties faced by the trade and this was one of the problems. The FM readily solved some of the issues and issued directions. This was one of them.
CENVAT Credit on endorsed bill of entry -
Issue: The earlier practice of endorsement of Bill of Entry by customs officer to an importer has since been dispensed with. This has led to ambiguity as to the mechanism by which CENVAT credit would be available to a subsequent manufacturer receiving the imported goods.
Decision: A process is being designed to get the importers to register with the Department, who may then more easily pass on the CENVAT credit of CVD to a manufacturer. The new mechanism will be in place by 31/12/2013.
As promised, CBEC has made the necessary changes in the Rules and issued the notifications on 31/12/2013.
What are the changes? The Central Excise Rules 2002 and the CENVAT Credit Rules 2004 are amended with effect from 1.3.2014.
1. Registration is made mandatory for importers issuing invoices on which CENVAT Credit can be taken.
2. An importer issuing cenvat table invoice is now made a “First Stage Dealer”
3. Certain consequential amendments are made.
In order to simplify the 1944 Rules, some of these provisions were simply wiped off from the statute - and now they are brought back with avoidable confusion.
There are still some questions to be answered.
1. Is a manufacturer's depot required to be registered?
2. Is an importer's depot required to be registered?
Notification No. , Dated: December 31, 2013 and
Notification No. , Dated: December 31, 2013