Warehouse classification for excise duty failed where an outside godown was not shown to be a registered warehouse.

Excise duty could not be demanded on finished goods kept in an outside godown merely on the assumption that the premises was a warehouse and the area-based exemption had ended. A godown cannot be treated as a warehouse unless it satisfies the statutory definition under Rule 2(h) of the Central Excise Rules, 2002 and is registered under Rule 9. The demand also failed because the show cause notice did not allege that the premises was a registered warehouse, and the notice itself proceeded on an earlier transfer of the goods. In the absence of the foundational allegation and proof, the demand was held unsustainable.

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Issues: Whether excise duty could be demanded on finished goods kept in an outside godown on the footing that the godown was a warehouse and the exemption had ceased on the relevant date.

Analysis: The demand was founded on the premise that goods lying in an outside godown should be treated as goods lying in a warehouse and, therefore, duty became payable when the area-based exemption period ended. That basis could not be sustained because the show cause notice did not allege that the premises was a registered warehouse, and a godown cannot be equated with a warehouse unless it answers the statutory definition under Rule 2(h) of the Central Excise Rules, 2002 and is registered under Rule 9. The finding that the assessee had not shown when the goods were transferred to the outside premises was also not supportable, since the notice itself proceeded on the footing that the transfer had occurred earlier. In the absence of the foundational allegation and proof, the demand could not rest on a mere presumption.

Conclusion: The duty demand was not sustainable and the assessee succeeded.

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