2015 (11) TMI 672 - AT - Central Excise

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 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 limited height of the space. It is very important to note that in the above rule as regard nature of the goods, it is not specified what should be nature of the goods. Therefore the nature of the goods has to be seen on case to case basis. In the present case, in my 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 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 for permission under Rule 4(4), the existing circumstances has to be seen. Appellant successfully demonstrated that over and above present quantity being stored, cannot create extra space for storage likewise there are more number of differences in the facts of the M/s. GKN Sinter Metals 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 applellant is prepared to comply the condition specified by the Commissioner such as execution of security bond alongwith bank guarantee. Therefore there is no chance of danger to the Revenue, for this reason also appellant deserve extension of permission. - Decided in favour of assessee.

Issues Involved:
1. Rejection of application for storage of finished goods outside the factory premises without payment of duty under Rule 4(4) of Central Excise Rules, 2002.
2. Determination of "exceptional circumstances" under Rule 4(4) of Central Excise Rules, 2002.
3. Evaluation of the nature of goods and shortage of storage space as criteria for granting permission.
4. Impact of continuous permission for storage on revenue and production.

Issue-wise Detailed Analysis:

1. Rejection of Application for Storage Outside Factory Premises:
The appellant, M/s. Sulzer India Pvt Ltd, applied for an extension to store finished goods outside the factory premises without payment of duty under Rule 4(4) of Central Excise Rules, 2002. The Commissioner of Central Excise, Pune IV, rejected this application, citing a lack of "exceptional circumstances." The appellant argued that the same set of facts had previously been considered exceptional, warranting the extension. The Commissioner allowed a grace period of three months beyond 31/3/2014 but did not extend the permission beyond 31/3/2015. The appellant contended that the rejection was incorrect as there was no change in circumstances.

2. Determination of "Exceptional Circumstances":
The appellant's counsel argued that "exceptional circumstances" should consider the nature of goods and shortage of storage space. The appellant's product, used in oil, chemical, and petrochemical refineries, requires significant storage space due to increased production and export. The Commissioner, however, held that the goods were not perishable and that the appellant had not demonstrated efforts to increase storage space within the factory. The Tribunal disagreed, stating that the nature of goods and shortage of space should be assessed on a case-by-case basis, and the appellant's situation met these criteria.

3. Evaluation of the Nature of Goods and Shortage of Storage Space:
The Tribunal noted that the appellant's goods, being heavy and packed in wooden boxes, could not be stacked beyond a certain height without risk of damage and injury. The appellant demonstrated that all available space in the factory was utilized, leaving no room for additional storage. The Tribunal found the Commissioner's insistence on expanding factory space unreasonable, as it is not always feasible due to financial and logistical constraints. The Tribunal emphasized that the existing circumstances should be considered, and the appellant had shown a genuine shortage of space.

4. Impact of Continuous Permission on Revenue and Production:
The Tribunal cited previous judgments (Balkrishna Industries Ltd. and M/s. Laben Laboratories Pvt. Ltd.) to support the appellant's case. These judgments established that permission under Rule 4(4) should be granted as long as exceptional circumstances continue, and the outside storage is treated as an extension of the factory premises. The Tribunal noted that the appellant had complied with all conditions, including executing security bonds and bank guarantees, ensuring no revenue loss. Denying permission would hamper production and cause financial loss to both the company and the revenue.

Conclusion:
The Tribunal concluded that the appellant had established exceptional circumstances regarding the nature of goods and shortage of space. The appeal was allowed, and the permission for storage outside the factory premises was extended up to 31/3/2016. The Tribunal emphasized the importance of safeguarding revenue while also supporting the appellant's production and business continuity.

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