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2015 (11) TMI 672 - CESTAT MUMBAI

2015 (11) TMI 672 - CESTAT MUMBAI - 2015 (330) E.L.T. 336 (Tri. - Mumbai) - Permission for warehousing of goods - Rule 4(4) - Rejection of the application for storage of finished goods outside the factory premise in terms of Rule 4(4) of Central Excise Rules, 2002 - whether the Commissioner is right in rejecting the application for extension of permission for storage of final product outside the factory premises without payment of excise duty or otherwise - Held that:- If the height of stacking .....

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view, since the nature of the goods is such that it can not be stored more than a particular quantity in the available space, this reason is sufficient to hold that the nature of goods in the present case is such that the same can not be stored more than a particular quantity of stock. - Expansion of factory is not every time possible due to various factors like availability of finance to buy the extra land and building, availability of land and building for purchase etc. particularly adjacent t .....

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als Pvt. Ltd case and facts of the present case therefore ratio of the M/s. GKN Sinter Metals Pvt. Ltd case is not applicable and therefore same is distinguished. Keeping in view the safeguard of Revenue, I observed that in the previous period when the Ld. Commissioner granted permission it was found that the applicant has never misused the facility of outside storage. No instances in leakage of Revenue as regard to the facility of storage of goods outside factory was reported, moreover the appl .....

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rwal, Addl. Commissioner(A.R.) ORDER Per : Ramesh Nair The appeal is directed against Order-in- Original No. PUN-EXCUS- 004-COM-12/14-15 dtd. 31/3/2015 passed by the Commissioner of Central Excise, Pune IV, wherein Ld. Commissioner has rejected the application for storage of finished goods outside the factory premise in terms of Rule 4(4) of Central Excise Rules, 2002. 2. The fact of the case is that appellant, M/s. Sulzer India Pvt Ltd vide their letter dated 19/1/2015 applied for extension of .....

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No. VGN (30) 126/Tech/Sulzer-Rule 4(4)/13-14dated 27/3/2015 proposing rejection of their application and personal hearing was granted before the Commissioner of Central Pune-IV. In the personal hearing appellant explained their application and also made additional written submission vide their letter 30/3/2015. After considering application as well as the submission at the time of hearing Ld. Commissioner has rejected the application for extension of permission under Rule 4(4) of Central Excise .....

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ere is exceptional circumstances. He submits that in the said rules even as per the Ld. Commissioner, exceptional circumstances have to arise with regard to (a) nature of goods (b) shortage of storage space. In the present case even earlier also Ld. Commissioner was granting the permission considering shortage of space as an exceptional circumstances therefore in the present case when same set of facts are on record and there is no change in the circumstances it is not correct on the part of .....

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377; 30 crores to average ₹ 200 crores over the year after that. Due to increase in the production the appellant has to maintain huge inventory of stock in the factory for which there is shortage of space. He further submits that appellant made all the efforts to utilize entire space and at present they are using entire space for the storage of goods in manufacturing activity therefore now no space left for storage of increased production, this itself has exceptional circumstances. He furt .....

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ide the factory. He further submits that their final product is meant for the project of the petroleum company and due to various factors, buyers projects get delayed which results the inventory in their factory gets accumulated. This is also one of the reason that space available in the factory is not sufficient and they are compelled to store goods outside factory. It is his submission that if the appellant is not allowed to store the goods outside factory premises then it will seriously hamp .....

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the reason that duty is payable on clearance of the goods and not otherwise. Since the outside storage is only extended premises of the factory, whether the goods stored in the factory or in the outside storage duty is not required to be paid till the goods are cleared to the customer. Moreover, the storage is allowed by the Ld. Commissioner only against execution of bond and bank guarantee by which the revenue is absolutely safeguarded therefore there is no loss to the revenue in granting permi .....

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application for extension of permission for storage the goods outside the factory should be allowed. 4. Shri. V.K. Agarwal, Addl. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that since the appellant is seeking permission continuously for long period therefore facility of storage of the goods without payment of duty cannot be extended to the appellant . He submits that exceptional circumstances does not mean that facility .....

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hat appellant has made out the case of exceptional circumstances. He relied upon the judgments of this Tribunal in the case of M/s. GKN Sinter Metals Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-I[Order No. A/1227/15/EB dated 28/4/2015]. 5. I have carefully considered the submissions made by both the sides and perused the record. 6. The short issue to be decided by me is that whether the Ld. Commissioner is right in rejecting the application for extension of permission for storage of final .....

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s is not like perishable therefore the criteria of nature of goods is not satisfied. As regard shortage of space, he has given reason that the Appellant have not done any efforts to increase the space and they are storing the goods outside since 2011 onwards, therefore criteria of shortage of space is also not satisfied. I do not agree with the contention of the Ld. Commissioner. The Appellant sought the permission under Rule 4(4) of Central Excise Rules, 2002 which is reproduced below: RULE 4. .....

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rson who gets the goods, falling under Chapter 61 or 62 or 63 of the First Schedule to the Tariff Act, produced or manufactured on his account on job work, shall pay the duty leviable on such goods, at such time and in such manner as is provided under these rules, as if such goods have been manufactured by such person : Provided that where any person had, instead of paying duty, authorized job worker to pay the duty leviable on goods manufactured in his behalf under the provisions of sub-rule (1 .....

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dity, whether or not excisable, shall pay the duty leviable on such molasses, in the same manner as if such molasses have been produced by the procurer. (3) *** (4) Notwithstanding anything contained in sub-rule (1), Principal Commissioner or Commissioner, as the case may be may, in exceptional circumstances having regard to the nature of the goods and shortage of storage space at the premises of the manufacturer where the goods are made, permit a manufacturer to store his goods in any other pla .....

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From the undisputed facts of the case, it is clear that the goods manufactured by the Appellant is in the nature that during storage, it can not be stacked above a limit due to the reason that it is very heavy and packed in the wooden boxes. If the height of stacking of boxes is increased, it is obvious that due to heavy weight, the boxes as well as the goods packed therein will get broken and dmaged. Therefore the nature of the goods in the present case is such that it can not be stored above a .....

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ot be stored more than a particular quantity of stock. The rule does not specify only the perishable nature of the goods, therefore the Ld. Commissioner s reasoning on this counts is misleading and without any basis. As regard the shortage of space, I find that the Appellant has demonstrated that the entire space available in their factory is being used either for manufacturing activity or for storage of the goods and no extra space left for the storage of increased manufactured goods. The Ld. C .....

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plies to each and every industry and the provision of Rule 4(4) will become redundant. Expansion of factory is not every time possible due to various factors like availability of finance to buy the extra land and building, availability of land and building for purchase etc. particularly adjacent to existing factory premises. Therefore the decision of expansion of the factory is the sole discretion of the assessee and department can not insist for that. For consideration of the Assessee s request .....

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use earlier some space was lying unused but now as shown by the Appellant entire space is being used. The appellants case is squarely covered by the judgments relied upon by the Ld. Counsel. The orders in the said judgments are extracted below: Balkrishna Industries Ltd. 5. The Revenue s plea is that such outside storage facility under sub-rule (4) of Rule 4 continuously for several years amounts to enjoying the warehousing facility under Rule 20 of the Central Excise Rules. However, I find tha .....

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outside storage under Rule 4(4) under the circumstance of exceptional nature having regard to the nature of the goods and shortage of storage space in the factory, is different from the warehousing facility under Rule 20. The outside storage place under sub-rule (4) of Rule 4, as clarified in the Boards Circular dated 1-5-1996, is an extension of the factory premises while the bonded warehousing under Rule 20 is not an extension of factory premises and for that purpose, separate registration h .....

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mes payable only at the time of removal of the goods. Therefore, the Revenues plea that there is deferment of collection of duty in cases of outside storage of the goods under Rule 4(4) without payment of duty, is not correct. 6. On going through the impugned order, I find that nowhere in the order, the reasons given by the appellant in their letter dated 7-8-2010 compelling them to store the tyres outside the factory have been discussed. The permission for storage outside the factory premises .....

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s or shortage of storage space continue, the permission under Rule 4(4) has to be given for onside storage of the goods without payment of duty after prescribing the conditions as are necessary for safeguarding the interest of the Revenue. In view of this, the impugned order is set aside and the matter is remanded back to the Commissioner for de novo decision after ascertaining as to whether the circumstances necessitating outside storage, as given in the appellants letter dated 7-8-2010, still .....

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and undisputed that the appellant was granted permission to store the goods without payment of duty outside the factory premises under the provisions of Rule 4(4) of Central Excise Rules, 2002 and in pursuance of the Board s Circular No.610/1/2002-CX dated 01.01.2002 I find that the appellant before expiry of permission on 10.12.2014 had made an application for extension. The said application was vetted by the Superintendent of Central Excise and had recommended that the permission be extended a .....

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erintendent as well as Jurisdictional Division Office recommend the case of the appellant as has been genuine one, it should have been considered in correct perspective by the office of the Commissioner of Central Excise. On perusal of the letter dated 26.12.2014 vide which the Commissioner has not granted extension of permission to store the goods without payment of duty, is a very casually worded and does not given any reason for rejection of the request. I find strong force in the contentions .....

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e duty becomes payable only at the time of removal of the goods from the factory. This rule, however, also provides that the goods can be removed from the factory without payment of duty to a warehouse under Rule 20 of the Central Excise Rules and that in that case the duty would be payable at the time of removal of the goods from the bonded warehouse. However, sub-rule (4) of Rule 4 prescribes that the Commissioner in exceptional circumstances having regard to the nature of the goods and shorta .....

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urer where the goods are made, permit a manufacturer to store his goods in any other place outside such premises, without payment of duty subject to such conditions as he may specify. Thus the words exceptional circumstances cannot be read in isolation but have to be read with the expression having regard to the nature of the goods and shortage of storage space at the premises of manufacturer where the goods are made . The examples of such exceptional circumstances can be the goods manufactured .....

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xpression in isolation and if the exceptional circumstances caused by the nature of the goods or shortage of storage space continue, the permission for outside storage under this sub-rule has to be granted subject to the conditions for safeguarding the interest of Revenue. The appellant in their letter dated 7-8-2010 have mentioned a number of circumstances which compel them to store the goods outside the factory premises. In my view, if these circumstances still exist as a result of which the a .....

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the warehousing facility under Rule 20 of the Central Excise Rules. However, I find that this ground has not been taken in the show cause notice, as the show cause notice has been issued on the basis that the permission under Rule 4(4) can be granted only under the exceptional circumstances and the said circumstances cannot be sort of perpetual and cannot continue beyond reasonable period. In view of this, at the adjudication stage, the Commissioner cannot travel beyond the show cause notice an .....

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20 is not an extension of factory premises and for that purpose, separate registration has to be obtained. The Revenues plea that outside storage of non-duty paid goods under Rule 4(4) means deferment in duty collection for which there is no provision under Central Excise Law except under the warehousing provisions of Rule 20, is also not correct, as the outside storage premises under sub-rule (4) of Rule 4, is an extension of the factory and within the factory the goods can be kept without pay .....

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ioner of Central Excise, Customs & Service Tax, Wardha is unsustainable and liable to be set aside and I do so. Impugned order is set aside with direction to the Commissioner of Central Excise, Nagpur to extend the permission for storing the finished goods outside the factory premises as per the provisions of Rule 4(4) of Central Excise Rules, 2002 upto 31st December 2015. 14. Appeal is disposed of as indicated as above. Ratio of the above judgments are squarely applicable in the present cas .....

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