2014 (2) TMI 6 - AT - Central Excise

Denial of CENVAT Credit - Confiscation of goods - storage of modvatable goods in other premises - Held that - In terms of the Board circular itself, modvatable goods can be stored outside the premises. The only requirement is the permission of the Department. Further the fact that the appellant was storing the said goods outside their walled factory for a longer period was also not being disputed by the Revenue. Merely because, on one fine morning, Revenue has considered the said practice to be wrong cannot be made a reason for seizure and subsequent confiscation of the said goods. Further, Revenue has also not disputed the said premises shown in the registration application filed by the respondent. This fact itself leads the bona fide of the assessee and strengthens their stand that the storing of modvatable goods outside the factory gate was on account of paucity of space in the factory and cannot be held to be an effort on their part to remove the goods clandestinely. The fact that the said goods having been reflected in the accounts of the security agency is also a relevant factor to be considered - Decided against Revenue.

Summary

Issues:
1. Whether goods stored outside the factory gate can be considered part of the factory premises for the purpose of Central Excise Act, 1944.
2. Whether the goods found in the open space outside the factory gate were liable for confiscation.
3. Whether the permission of the Department was required for storing modvatable goods outside the factory premises.

Analysis:

Issue 1:
The case involved a dispute regarding whether the open space outside the factory gate could be considered part of the factory premises under the Central Excise Act, 1944. The Commissioner (Appeals) held in favor of the assessee, stating that the open space outside the walled section of the factory should be treated as part of the factory premises. He referred to the definition of factory in Section 2(e) of the Act and various Tribunal decisions to support this conclusion. The Commissioner noted that the assessee had been using the open space for storing goods since the unit started production, and it was even included in the application for central excise registration. The Department had never objected to this use, further strengthening the argument that the goods found in the open space were not removed clandestinely.

Issue 2:
Regarding the confiscation of goods found outside the factory gate, the Revenue contended that the outside area should not be considered part of the factory premises. They emphasized that the manufacturer should seek permission for storing goods outside the factory, which the assessee had not done in this case. However, the Tribunal found that there was no dispute over the factual position that modvatable goods could be stored outside the premises with the Department's permission. The Tribunal also noted that the Revenue did not contest the long-standing practice of storing goods outside the factory. The Tribunal concluded that the mere change in the Revenue's perception of the practice could not justify the seizure and confiscation of the goods.

Issue 3:
The question of whether the Department's permission was required for storing modvatable goods outside the factory premises was also addressed. The Tribunal referred to a Board circular clarifying that such goods could be stored outside with permission. While the Revenue argued that the absence of permission justified confiscation, the Tribunal found that the assessee's long-standing practice and inclusion of the open space in the registration application demonstrated their bona fide intent. The Tribunal considered the goods being reflected in the security agency's accounts as a relevant factor, ultimately rejecting the Revenue's appeal and upholding the order of the Commissioner (Appeals).

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) and rejected the appeals filed by the Revenue, emphasizing that the storing of goods outside the factory gate was justified based on the long-standing practice and the absence of objections from the Department.