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TMI Blog2011 (11) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities like machines for tyre manufacture and tyre curing machines but the related utilities also viz. Boilers, Compressors, Power Generating Sets, Tool Room, Testing Facilities, etc. and which have occupied almost the entire space available in the factory premises, leaving a small storage space for final tyres; (b) They manufactured 900 to 1000 different types of Specialist Tyres. Most of the clients place export orders for bulk quantities with phased/piecemeal delivery schedule every month and this requires them to have sufficiently large production run for each type of tyre and hold inventory of such tyres over a period of time for honouring the phased export shipments. (c) Their main production is of agricultural tyres, whose demand is seasonal in nature and hence for this reason also, they have to manufacture such agricultural tyres in sizable quantities and store for smooth supplies during off-season also. (d) The existing storage space adjacent to their factory loading ramp and part of the mezzanine floor is sufficient just for the storage of 4 to 5 days' production i.e. 450-500 tonns and unless this space is cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till September, 2010. In the meantime, the appellant's second plant at Chopanki also started production and similar permission for outside storage at the same premises was granted in respect of the tyres manufactured in Chopanki Plant also. 1.3 In August, 2010, the appellant again requested the Commissioner for extension of the facility of outside storage under Rule 4(4) of the Central Excise Rules mainly on the grounds mentioned above, emphasizing that over 90% of their production is exported and the outside storage facility is used mainly in respect of the clearances for export and that on account of expansion of production capacity every year at both the Plants, they do not have the adequate storage facility at their factory premises. The Commissioner, however, issued a show cause notice dated 25-8-2010 to the appellant proposing for withdrawal of the permission on the ground that they had been enjoying this facility for the last 5 years continuously without making efforts to create storage facility in their factory as required by the law and that the permission under Rule 4(4) of the Central Excise Rules, 2004 can be granted only in exceptional circumstances and the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production capacity results in more space being occupied by the production machinery and other ancillary facilities, leaving less space for storage, that in addition to this, on account of nature of demand for their product and also export commitments, the appellant are required to store huge quantity of tyres for which they do not have the storage facility at their plant, that on account of shortage of space to store the tyres, which they are required to store to meet their export commitments, the 'exceptional circumstance' necessitating outside storage of goods have continued, that for this reason, the Commissioner's order denying this facility is incorrect, that outside storage under Rule 4(4) cannot be compared with warehousing under Rule 20 of the Central Excise Rules, 2002, that as mentioned in Board's Circular No. 206/40/1996, dated 1-5-1996 outside storage is an extension of the factory premises, that in terms of this Circular of the Board, the permission for outside storage of Cenvat credit availed goods, which due to various reasons cannot be stored in the factory, must be granted by treating the outside storage as extension of the factory premises and prescribing the sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide storage was under the warehousing provisions of Rule 20 and that in view of this, there is no infirmity in the impugned order. 5. I have carefully considered the submissions from both the sides and perused the records. The goods produced and manufactured in a factory can be kept within the factory without payment of duty, as in terms of the provisions of Rule 4(1) of Central Excise Rules, 2002, the 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 shortage of storage at the premises of the manufacture where the goods are made, permit a manufacturer to store his goods at any other place outside the factory premises without payment of duty, subject to such conditions as he may specify. In this regard, sub-rule (4) is reproduced below :- "R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and invoke Rule 20 of the Central Excise Rules, 2002, for denying the permission. Moreover 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 Board's 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 has to be obtained. The Revenue's 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 sto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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