Factory shift and transfer of capital goods credit require Rule 57AF scrutiny before any duty demand or denial of credit

Transfer of capital goods from a closed unit to another unit required examination of the factory-shift mechanism under Rule 57AF before sustaining duty demand or denial of credit. The existing orders were deficient because they did not consider whether unutilised credit could be transferred when the stock or capital goods were moved and properly accounted for to the Commissioner's satisfaction. The dispute therefore needed fresh adjudication by the original authority, with a personal hearing, after applying Rule 57AF to the shifted factory facts.

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Issues: Whether demand of duty and denial of credit on capital goods removed from one unit to another could be sustained without considering the effect of factory shift and the applicability of Rule 57AF.

Analysis: The capital goods were transferred from the closed unit to the assessee's other unit, and the dispute centered on whether credit already availed on those goods could be reversed without examining the statutory mechanism for transfer of credit on shifting of a factory. The lower authorities did not consider Rule 57AF, which permits transfer of unutilised credit when a factory is shifted, provided the stock or capital goods are transferred and accounted for to the satisfaction of the Commissioner. The request for adjudication also required fresh consideration with opportunity of personal hearing.

Conclusion: The matter could not be finally decided on the existing orders and required reconsideration by the original adjudicating authority after applying Rule 57AF and granting personal hearing.

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