M/S Leben Laboratories Pvt. Ltd vs Cce Nagpur

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. II

APPEAL NO. E/85344/15  Mum

(Arising out of Order-in-Original No. IV(16)30-09/2014/TECH/WARDHA dated 26.12.2014 passed by the Commissioner of Central Excise & Customs, Nagpur)

For approval and signature:

Shri. M.V. Ravindran, Member (Judicial)

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

M/s Leben Laboratories Pvt. Ltd. : Appellant

Versus

CCE Nagpur

Respondent

Appearance

Shri Prasad Paranjape, Advocate for Appellants Shri H.M. Dikshit, Asst. Commissioner (A.R.) for Respondents

CORAM:

Shri. M.V. Ravindran, Member (Judicial)

Date of Hearing : 30.03.2015 Date of Decision : 30.03.2015

ORDER NO.

Per : M.V. Ravindran This appeal is directed against Order-in-Original No. IV(16)30-09/2014/TECH/WARDHA dated 26.12.2014.

2. Heard both sides and perused the records.

3. Learned A.R. has raised preliminary objection against the maintainability of this appeal. It is his submission that the letter of the Asst. Commissioner dated 26.12.2014 indicating the decision of the Commissioner is not an appealable order.

4. Learned Counsel brings to my notice that the Honble High Court of Bombay, Nagpur Bench, in their oral order dated 23.01.2015, has rejected the petition of the assessee on the ground that there is an alternative remedy available on such issue. It is his submission that in view of this, the appeal may be heard and disposed of on merits.

5. Preliminary objection raised by learned A.R. needs to be dismissed as I find that the Honble Bombay High Court in Writ Petition No.8 of 2015 has recorded the statement of Senior Standing Counsel for the Central Excise Department as to there is an alternative remedy available to the petitioner under Section 35(2) of the Central Excise Act, 1944 and rejected the Writ Petition recording that there is an alternative remedy available to the petitioner.

6. In view of such clear-cut findings, I find that the appeal needs to be heard and disposed of on merits and I proceed to do so.

7. Relevant facts that arise for consideration are that the appellant here-in had sought permission from the Commissioner to store the finished goods manufactured by them outside the factory premises without payment of duty on the ground of shortage of space. Such permission was granted to the appellant and was renewed regularly. By a letter dated 10.12.2014, the appellant again sought extension/renewal of permission to store the goods without payment of duty in a ware-house outside the factory. The said letter of the appellant seeking extension was rejected by the Office of the Commissioner of Central Excise, vide letter dated 26.12.2014 which is under challenge before the Tribunal.

8. Learned Counsel would draw my attention to the facts of the case and also submit that when the appellant sought extension by letter dated 10.12.2014, Superintendent of Central Excise, Range Akola visited the premises of the appellant and had recommended that the request for extension of permission is genuine and may be considered. It is his submission that the said request was considered by the Jurisdictional Asst. Commissioner who in turn had informed the office of the Commissioner of Central Excise, Wardha. He would submit that when the appellant was granted permission to store the goods outside the factory premises for two years, there is no objection or nothing objectionable undertaken by the appellant and the goods which were stored outside in a warehouse are situated just 500 meters away from the factory premises. He would submit that the Commissioner has not given any reason for not granting the extension of permission to store the goods without payment of duty. He would submit that an identical issue came up before this Tribunal in the case of Anutone Accoustics Ltd. vs. CCE Bangalore  2010 (250) ELT 590 (Tri. Bang) and in the case Balkrishna Industries Ltd. vs. CCE  2013 (297) ELT 257 (Tri. Del.) and the Tribunal held that request for extension of permission cannot be rejected on the ground that exceptional circumstances cannot be perpetual. He would submit that the appellants case is exceptional one and inasmuch as the goods are stored outside factory are for export purposes and export orders cannot be processed immediately on receipt of the same. Hence the appellant produces the goods in anticipation of export orders and due to shortage of space the request for storage outside the premises is met.

9. Learned A.R. on the other hand, would draw my attention to the provisions of Rule 4(4) of the Central Excise Rules, 2002. It is his submission that the said permission as per provisions of Rule 4(4) are to be given having regard to the nature of the goods and shortage of storage space at the premises of the manufacture in an exceptional circumstances and cannot be a routine matter. He would submit that the appellant had sought extension for storing the goods outside the factory premises atleast once before this permission was rejected.

10. I have considered the submissions made by both the sides and perused the records.

11. The only issue in this case is whether the learned Commissioner was correct in rejecting the request for extension of permission to store the goods outside the factory premises. On perusal of the records, it is noticed and undisputed that the appellant was granted permission to store the goods without payment of duty outside the factory premises under the provisions of Rule 4(4) of Central Excise Rules, 2002 and in pursuance of the Boards Circular No.610/1/2002-CX dated 01.01.2002 I find that the appellant before expiry of permission on 10.12.2014 had made an application for extension. The said application was vetted by the Superintendent of Central Excise and had recommended that the permission be extended as the request seems to be genuine and the appellant had fulfilled all the conditions as laid down by the CCE Nagpur in letter No. IV(10)30-29/2011/TECH/9075 dated 25.06.2014. The said recommendation letter of the Supdt. of Central Excise, Akola was considered by the Jurisdictional Asst. Commissioner and he also recommended for the extension of permission to store the goods without payment of duty outside the factory premises.

12. In my considered view, if both the field formations i.e. Range Superintendent as well as Jurisdictional Division Office recommend the case of the appellant as has been genuine one, it should have been considered in correct perspective by the office of the Commissioner of Central Excise. On perusal of the letter dated 26.12.2014 vide which the Commissioner has not granted extension of permission to store the goods without payment of duty, is a very casually worded and does not given any reason for rejection of the request. I find strong force in the contentions raised by the learned Counsel that in an identical set of facts in the case of Balkrishna Industries Ltd. (supra) this Tribunal was considering the provisions of Rule 4(4) of the Central Excise Rules, 2002 and held as under:-

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 :-

Rule 4(4). - Notwithstanding anything contained in sub-rule (1), Commissioner may, in exceptional circumstance having regard to the nature of the goods and shortage of storage space at the premises of the manufacturer where the goods are made, permit a manufacturer to store his goods in any other place outside such premises, without payment of duty subject to such conditions as he may specify. Thus the words exceptional circumstances cannot be read in isolation but have to be read with the expression having regard to the nature of the goods and shortage of storage space at the premises of manufacturer where the goods are made. The examples of such exceptional circumstances can be the goods manufactured being of hazardous nature or there is seasonal production of such volume, which cannot be stored in the factory or due to some commitment for sale, domestic or for export, which have to be made during some period, huge quantity has to be manufactured and stored so that the assessee is able to supply the goods as soon as the orders are received. The Commissioners interpretation of sub-rule 4(4) that the exceptional circumstances cannot continue in perpetuity is not correct, as he has read this expression in isolation and if the exceptional circumstances caused by the nature of the goods or shortage of storage space continue, the permission for outside storage under this sub-rule has to be granted subject to the conditions for safeguarding the interest of Revenue. The appellant in their letter dated 7-8-2010 have mentioned a number of circumstances which compel them to store the goods outside the factory premises. In my view, if these circumstances still exist as a result of which the appellant have no option but to store the goods outside the factory premises, the permission for outside storage has to be granted subject to the conditions as are necessary for safeguarding the interest of the Revenue. The permission under sub-rule cannot be refused just because an assessee has been enjoying the same continuously for certain number of years.

6.?The Revenues plea is that such outside storage facility under sub-rule (4) of Rule 4 continuously for several years amounts to enjoying the warehousing facility under Rule 20 of the Central Excise Rules. However, I find that this ground has not been taken in the show cause notice, as the show cause notice 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 Boards 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 Revenues 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 storage premises under sub-rule (4) of Rule 4, is an extension of the factory and within the factory the goods can be kept without payment of duty and as such, there is no time limit prescribed in this regard the duty becomes payable only at the time of removal of the goods. Therefore, the Revenues plea that there is deferment of collection of duty in cases of outside storage of the goods under Rule 4(4) without payment of duty, is not correct.

13. In view of the foregoing and judicial pronoucements and also the facts and circumstances of this case, I find that the letter dated 26.12.2014 issued from the office of the Commissioner of Central Excise, Customs & Service Tax, Wardha is unsustainable and liable to be set aside and I do so. Impugned order is set aside with direction to the Commissioner of Central Excise, Nagpur to extend the permission for storing the finished goods outside the factory premises as per the provisions of Rule 4(4) of Central Excise Rules, 2002 upto 31st December 2015.

14. Appeal is disposed of as indicated as above.

(Dictated in Court)

(M.V. Ravindran) Member (Judicial) nsk ??

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