‘Importer’ and/ or ‘First Stage Dealer’ – A case of multiple personality disorder?

July 01,2014
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Pratik Shah, Partner, SKP Business Consulting LLP
Jigar Doshi, Senior Manager

A.   Background

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.

Under Central Excise, 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.

In this regard, there was an air of ambiguity in provisions (particularly in the definition of First Stage Dealer as defied under Rule 2 (ij) of CENVAT Credit Rules, 2004) as to whether 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.

Since the above is not covered in the definition, it was 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.

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.

Recently, the Central Board of Excise and Customs (CBEC) issued certain Notifications No. 08/2014-CE (NT), 09/2014-CE (NT) and 10/2014-CE (NT) to include the term ‘importer’ under the registration category for a excise dealer.

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