18 March 2014 | Volume 6 Issue 24
Recent changes under Excise for Importers operating as Dealers

Typically, in the Indian scenario there are importers who import goods from outside India for the purpose of sale to Indian customers. On account of imports, the importers pay customs duty at specified rates. Out of the total customs duty, Countervailing Duty (CVD) and Special Additional Duty (SAD) paid at the time of imports are passed on to the Indian customers through an invoice so that customers can claim the credit of such duties as the importer cannot utilise the said duties.
Let us go to the background of the provisions which enable the importer to pass on the credits. We would like to refer to the provisions of Central Excise, wherein it is mentioned that a person who is registered as a 'First Stage Dealer' and satisfies specified conditions can pass on the credit of CVD and SAD on the basis of an invoice.
The definition of a first stage dealer is reproduced below:
'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
(ii) an importer or from the depot of an importer or from the premises of the consignment agent of the importer, under cover of an invoice
From the above meaning, it appears that an importer who directly imports from outside India and is engaged in selling to Indian customers does not seem to be covered, as the definition specifies only a dealer who purchases from a manufacturer or importer.
However, for practical purposes and based on the industry practice, a view was taken that an importer would be deemed to be a first stage dealer and can pass on the credit of CVD and SAD through an invoice. 
Since the above is not covered in the definition, it is possible to contend that an importer who imports and sells should not be regarded as a first stage dealer and accordingly, duties paid on imports cannot be passed on.
To remove the above ambiguity, the Government issued a Notification to give wider meaning to the definition of a first stage dealer and through this amendment an importer would be regarded as a first stage dealer. The said Notification is effective from 1 March 2014.
Apart from the above, there are changes introduced through Notifications to enable an importer who wishes to carry out business as a first stage dealer, to select the appropriate option of 'Importer' in the excise registration application form (Form A-1). Furthermore, an amendment is made in the quarterly return form which a first stage dealer has to file, to enable an importer to show the imports made from parties outside India by selecting the tab 'self' under the column 'Name and Address of Manufacturer/Importer or First Stage Dealer'. The same is not available in the current format of the return.
Clarificatory changes are made through the Notification to enable the buyer to claim credit based on the invoice issued by an 'importer'.
The aforesaid Notifications will be effective from 1 April 2014, whereas the Notification to widen the meaning of a first stage dealer is applicable from 1 March 2014.
The changes introduced through the above Notifications are welcomed by the industry players as these changes were in a way deemed or followed by them in the past. Through these changes, the intention of the Government has become clearer.


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