STORAGE OF INPUTS OUTSIDE MANUFACTURER'S FACTORY – CENVAT CREDIT

[Dr. Sanjiv Agarwal]

Storage of Inputs outside the Factory of Manufacturer (Rule 8)

The Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction over the factory of a manufacturer of the final products may, in exceptional circumstances having regard to the nature of the goods and shortage of storage space at the premises of such manufacturer, by an order, permit such manufacturer to store the input in respect of which CENVAT credit has been taken, outside such factory, subject to such limitations and conditions as he may specify.

However, where such input is not used in the manner specified in these rules for any reason whatsoever, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such input.

Thus, this rule applies only to manufacturers (and not to service providers) and provides flexibility to manufacturer/factory to store inputs at a place other than factory but only after approval from the jurisdictional Deputy or Assistant Commissioner, after considering -

(i) nature of goods

(ii) storage space

subject to conditions as may be imposed in writing by way of an order.

Judicial Pronouncements

In Deepak Fertilizers and Petrochemicals Corporation Ltd. v. CCE, Belapur 2013 (4) TMI 44 - BOMBAY HIGH COURT, where assessee took credit of services used in relation to erection, commissioning and installation of storage tank for storage of inputs viz. imported ammonia outside factory, in view of rule 3(1) of Cenvat Credit Rules, 2004 that input services may be received anywhere and credit is available if they are received by manufacturer, it was held that services in relation to erection, commissioning and installation of storage tank facility for storage of imported inputs/ammonia outside factory were eligible as input services for availing Cenvat credit.

In Nitcon Industries (P) Ltd v. CCE, Mumbai-II 2014 (9) TMI 681 - CESTAT MUMBAI, it was held that any service availed by assessee who was a manufacturer of excisable goods in course of their business is entitled for Cenvat credit. It was immaterial whether such premises were within factory or outside that. Accordingly, service tax paid on rent of premises used for storage of manufactured goods was eligible for input service credit for the assessee.

In Triveni Engg. and Inds. Ltd v. CCE, Meerut-II 2014 (9) TMI 680 - CESTAT NEW DELHI, wherein weighbridge was outside the factory for weightment of sugar-cane during crushing season and receipt, ownership and genuine acquisition was not disputed, it was held that weightment is an integral part of process of sugar industry, therefore any interpretation to deny capital goods credit shall defeat spirit of law. Accordingly assessee was eligible to avail Cenvat credit on the same.

In Maihar Cement v. CCE, Bhopal 2012 (5) TMI 550 - CESTAT NEW DELHI, wherein assessee used explosives in mines, it was held that Cenvat credit was admissible on captive mines, which means assessee’s own mines rather than mine those around factory of assessee. Mines by very nature could not be inside factory. Hence, Cenvat credit could not be denied on ground that mines were situated 3 to 4 kms away from factory. [Case followed: Madras Cements Ltd v. CCE, Chennai 2010 (7) TMI 179 - SUPREME COURT ].

In Hi Tech Power and Steel Ltd v. CCE, Raipur 2013 (7) TMI 752 - CESTAT NEW DELHI, it was held that construction service of coal shed for storage was eligible for Cenvat credit of service tax as shed constructed for storage of coal was required for manufacturer of finished goods. [Cases relied: Coca Cola India Pvt. Ltd. v. CCE, Pune-II 2009 (8) TMI 50 - BOMBAY HIGH COURT; CCE, Pune-II v. Raymond Zambaiti Pvt Ltd 2010 (3) TMI 402 - CESTAT, MUMBAI ].