Difficulty in availing CENVAT on sale in transit transaction
Section 3(b) of the Central Sales Tax Act provides for the circumstances under which a sale or purchase of goods is said to take place in the course of interstate trade or commerce. According to the Section, a sale or purchase of goods shall be deemed to take place in the course of interstate trade or commerce if the sale or purchase is affected by a transfer of documents of title to the goods during their movement from one state to another. Thus, the sale is affected by a transfer of documents of title to goods during their movement from one State to another. Where the property in the goods has passed/the movement has commenced, the sale will not evidently fall within Section 3 (b) or when the property in the goods passes after the movement from one State to another, such sale will not also fall within the section. Accordingly, the section provides for endorsement in the documents during the journey or movement of goods and not earlier to that.
Under Central Excise, where a registered person places an order on a manufacturer for supply and delivery of goods directly to customer/ assessee and the goods are also accordingly transported/ despatched from the manufacturers’ premises to the users’ premises without being brought to the registered persons’ premises, the manufacturer has to issue an invoice under Central Excise Rules, 2002. The prescribed invoice under Central Excise should also contain (in addition to specified details), the (8) `consignee’s name and address for the purpose of availing CENVAT credit. Thus, before the goods move from one State to another or one place to another, the consignee’s name (second buyer) also should be incorporated in the documents of title of goods to make him eligible to avail CENVAT. If this condition is satisfied in order to avail the CENVAT credit, then the transaction will not qualify as an E1 sale under the Central Sales Tax Act.
A close comparison of mandatory requirement under the Central Sales Tax Act, 1956 and Central Excise Act, 1944/Rules, 2002 will lead us to find a contradiction between these two Acts as far as sale in transit is concerned. Both the Acts are Central legislations and as such there should not be any anomaly or contradiction on the same issue. When sale in transit is recognized or accepted under Central Excise Act, 1944/Rules, 2002, the same should have been allowed under Central Sales Tax Act also as per Central Excise requirement. At present, the industry faces hardship in cases of sale in transit under Central Sales Tax Act as documents of title to goods are to be endorsed during the course of transit whereas the Central Excise Act requires such endorsement for such sale in transit to be done before commencement of such movement. Hence, statutory provisions in this respect are to be reviewed to remove the contradiction in the statutes.
Thanks ranjit for such a nice post.
Being a CA, you are expert of this field. And hope to get more such nice posts by you.
Being a trader can i issue a cenvat invoice to second dealer to whome i have sold goods in transit. Manufacturer has originally issue excise invoice in my name.