Transfer of capital goods within the same assessee's units: no clandestine removal, no extended period, and credit transfer allowed.

Transfer of capital goods between two units of the same assessee did not constitute clandestine removal where the movement, destination and commencement of production at the receiving unit were disclosed to the department. Rule 57AF was treated as permitting transfer of factory machinery along with unutilised credit when the factory was shifted or merged, and the facts showed no intent to evade duty or basis for invoking the extended period. Because the record did not establish suppression of facts or duty liability, the duty demand and penalties were held unsustainable, and the assessee was entitled to transfer the unutilised credit.

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Issues: Whether duty demand, penalty, and invocation of the extended period were sustainable on removal of capital goods from one unit to another of the same assessee, and whether the assessee was entitled to transfer the unutilised credit.

Analysis: The transfer of machinery was between two units of the same assessee, the movement of goods and commencement of production at the receiving unit were disclosed to the department, and the goods were traceable at the destination unit. Rule 57AF permitted transfer of factory machinery with transfer of unutilised credit when the factory was shifted or merged, and the facts showed no clandestine removal or evidence of intent to evade duty. The record also disclosed that the application seeking transfer of credit remained unattended, and the circumstances did not justify suppression of facts or the extended period. In the absence of duty liability, penalties under the excise provisions could not survive.

Conclusion: The duty demand, penalties, and invocation of the extended period were not sustainable, and the assessee was entitled to transfer the unutilised credit.

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