Issue discussed: Stock Transfer By Registered Dealer Under Central Excise There have always been different views as to the consequence of Stock Transfer by Dealer under Central Excise. Some have the opinion that there is a change in stage i.e. from First Stage to Second Stage while the others opine that there is no change in stage and that it remains intact.
Let us find it out by ourselves:
Firstly let's discuss the meaning of First Stage Dealer under Central Excise: As per Rule 2(ij) of Cenvat Credit Rules a First Stage Dealer (FSD) means a dealer, who purchases goods directly from-
(i) The manufacturer under the cover of an invoice issued in terms of the provision 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 premise from where the goods are sold by or on behalf of the said manufacturer, under the 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. As per rule 2(t) of Cenvat Credit Rules a Second Stage Dealer (SSD) means a dealer who purchases the goods from a FSD.
Here's a small conversation between a Dealer registered under Excise and an excise Consultant:
Question 1: Dealer: Sir, I have PAN based excise registration number, one for my Branch A and one for my Branch B. I make purchase directly from manufacturer at my Branch A. Can I do a stock Transfer to my Branch B for further sale?
Excise Consultant: Yes, very much you can do stock Transfer.
Question 2: Dealer: Sir, I generally purchase from Manufacturer and when I sale the same I mark on my invoice as issued by First Stage Dealer. Now when I transfer the goods to my Branch B for sale then does my Branch B can also make sale as First Stage Dealer?
Excise Consultant: See, when your Branch B will further sell the stock transferred by you from Branch A, it shall become a Second stage Dealer.
Let me explain my point:
Look, if you go through the definition of FSD it says FSD is one who purchases goods directly from -Manufacturer or his Consignment Agent or from his Depot -Importer or his Consignment agent or from his depot In your case, the Branch B has not purchased from manufacturer or importer but from Branch A which is a FSD. Therefore, your Branch B becomes a SSD.
Qusetion3: Dealer: This means that whenever we make a stock transfer we shorten the credit chain? Well, what are the implications in case we make a stock transfer of the imported goods?
Excise Consultant: I think you mean in case you are an importer. In that case, your branch B becomes your depot. So, in case you make a stock transfer from your BranchA(as importer) to Branch B(depot of importer), Branch B will sell as Depot of Importer and the credit chain shall remain intact. Conclusion:Stock Transfer results in change of stage of First Stage Dealer or Second Stage Dealer.