CX - Rule 4 - Storing excisable goods outside factory w.o payment of duty - Exceptional circumstances undoubtedly would imply brief period - Permission sought is for very long period - there is nothing wrong in reasoning given by Commr. while rejecting request: CESTAT
By TIOL News Service
MUMBAI, JUNE 01, 2015: THE Appellant vide letter dated 12/7/2013 and 11/8/2014 requested for permission under Rule 4(4) of CER, 2002 to store excisable goods outside the factory premises without payment of duty. The Commissioner after considering various submissions rejected the request of the appellant and, therefore, the appellant is before the CESTAT.
It is submitted that they have shortage of space in the factory; operations have expanded and certain parts of the factory required re-construction & in view of this position, they are finding it difficult to store the finished products; that over a period of time customers want the goods Just in Time (JIT) with the result that appellants have to keep high inventory and, therefore, require more space for storing the final goods. In view of this position they had requested the Commissioner to permit them to store goods for the period of two years outside the factory premises without payment of duty. Reliance is placed on the decision in Anutone Acoustics Ltd. - 2010-TIOL-276-CESTAT-BANG.
The AR inter alia submitted that the place where appellant wants to store the goods is already registered in the name of appellant as a dealer and, therefore, cannot be allowed to be used for keeping non-duty paid goods; that Rule 4(4) covers the situation of exceptional nature and shortage of space for continuous period cannot considered as a situation of exceptional nature; that appellant is free to clear his goods on payment of duty and store in a depot outside the factory and sell the same from there.
The Bench extracted rule 4(4) of CER, 2002 and observed that the rule empowers the Commissioner, in exceptional circumstances, to permit a manufacturer to store goods outside factory premises without payment of duty subject to conditions.
The Tribunal also noted -
"…As is clear from the submission of the Ld. Counsel that they want to improve their customer service by storing higher inventory and provide just in time service to their customer. It is also noted that the appellant is non-committal about the period and would need permission atleast for two years…."
Thereafter, the Bench reproduced the report of the Assistant Commissioner relied upon by the Commissioner (who rejected the request) and wherein it is mentioned that the unit was visited by the Range Supdt. and who reported -
(1) In the course of relocation of their existing machinery form plant-I (due to demolishing the same), no machinery is proposed to be shifted to the area which is presently used for storing finished goods. Effectively, the restructuring will not in any way affect the area where the finished goods are stored.
(2) The assessee can create additional space by re-organizing the racks on which the finished goods are stored presently for storing the goods, in case of exigency and to meet the requirements that arose due to the estimated growth.
(3) Further, the company also have a piece of vacant land admeasuring 672 sq. meters (24 m x 28 m) (As shown on page 3 exhibit D of their letter dated 11.08.2014) nearby the existing finished goods area (BSR) which can be constructed and can be utilized for storage of finished goods.
The Bench, therefore, held -
+ We don't find anything wrong in the above reasoning. Permission sought is for very long or endless period. When space is available near the BSR there is no reason not to construct the storage place there itself. Exceptional circumstances undoubtedly would imply temporary and brief period. It is also to be noted that even now appellant can store the goods in the proposed place but after payment of duty on provisional or final assessment basis.
The case law cited by the appellant was distinguished and it was noted that in the said case the Tribunal had remanded the matter.
In the matter of application of rule 20 of CER, 2002, the Bench observed that the same were warehousing provisions under which notified goods can be removed from the factory to warehouse or from one warehouse to another without payment of duty; that since the goods manufactured were not notified under warehousing provisions the benefit cannot be extended.
Holding that the reasons given by the appellant are not exceptional in nature so as to grant permission under Rule 4(4) of the CER, 2002, the order of the Commissioner was upheld and the appeal was rejected.
(See 2015-TIOL-990-CESTAT-MUM)
