Is credit admissible to the assessee if the invoices were issued by second stage dealer, however the inputs were purchased from the agent of such dealer?

PJ/Case Law /2016-17/3416

Case-HYDRO ELECTRO MACHINERY Versus COMMISSIONER OF C. EX., MUMBAI-III
Citation-2017 (345) E.L.T. 314 (Tri. - Mumbai)
Brief Facts-The fact of the case is that appellant availed 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 show cause notice was issued wherein it was contended that the firms from whom appellant had purchased inputs are third stage dealer and on procurement of input from third stage dealer, Cenvat credit is not available. Accordingly, the appellant contravened the provisions of Rule 9(1), Rule 9(2), Rule 9(4) and Rule 9(5) of Cenvat Credit Rules, 2004 inasmuch as appellant was required to purchase the inputs from first stage or second stage dealer and the burden to prove that Cenvat credit availed by the assessee is correct is on the assessee. The adjudicating authority, after considering the submissions made by the appellant held that availment of Cenvat credit on the invoices of second stage dealer is correct and accordingly the demand was dropped. Being aggrieved by the Order-in-Original, Revenue filed an appeal before the Commissioner (Appeals), who vide impugned order allowed the appeal of the Revenue therefore appellant appeared before the Tribunal.
Appellant’s Contention-Shri T.C. Nair, ld. Counsel for the appellant submits that appellant have availed Cenvat credit on the strength of invoices issued by second stage dealer, in the said invoices appellant’s name is appearing as consignee therefore irrespective of the person from whom input was purchased but duty paying documents is consigned to the appellant, credit is 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 and also by way of clarification in circular which are referred below :
(a)        Commr. of C. Ex., Ahmedabad-II v.Transformers & Rectifiers (India) Ltd. [2012 (281)E.L.T.670 (Guj.)]
(b)        Kunststoff Polymers Ltd. v.Commissioner of C. Ex., Bhopal [2009 (247)E.L.T.546 (Tri.-Del.)]
(c)        C.B.E. & C. Circular No. 218/52/96-CX, dated 4-6-1996 on “Modvat on transit sale”.
(d)        Relevant text of C.B.E. & C. Circular No. 96/7/95-CX, dated 13-2-1995 on “transit sale”.
Respondent’s Contention-H.M. Dixit, ld. Asstt. Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
Reasoning Of Judgement-On careful consideration of submissions made by both sides, the Tribunal found that invoices on which Cenvat credit was availed were admittedly issued by second stage dealer and the name of the appellant 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 appellant 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.
As per the above clarification, 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. On this very issue, this Tribunal in the case of Transformers & Rectifiers (India) Ltd. (supra) and Kunststoff Polymers Ltd. (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, impugned order is not sustainable, hence the same is set aside. Appeal is allowed.
(Dictated in Court)
Decision-Appeal allowed.
Comment-The gist of the case is thatinvoices were issued to the assessee by second stage dealer and the duty paying documents also showed the name of the assessee as consignee. However, the input was purchased from agent of second stage dealer. It was held that since the duty paying invoices were consigned to the assessee, credit was legally admissible to him even if purchase of inputs were made by assessee from agent of second stage dealer in accordance with Rule 9 of Cenvat Credit Rules, 2004.
Prepared By - Praniti Lalwani

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PJ/Case Law /2016-17/3416

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