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Issues: Whether capital goods on which Modvat credit had been taken were removed from the factory so as to attract duty under Rule 57-S of the Central Excise Rules, 1944, and whether the extended period under Section 11A of the Central Excise Act, 1944 and penalty were sustainable.
Analysis: The capital goods remained installed at the same place in the same premises, which had been leased out, and the unit using the premises had obtained a separate registration with an approved layout plan showing the installation. The mere lease of the premises and the use of the same installed machinery in the manufacture of IC engines did not amount to removal of the capital goods from the factory. As there was no actual removal and the departmental authorities had approved the layout, the basis for invoking the extended limitation and alleging suppression was not made out. In the absence of removal, the duty demand and consequential penalty could not stand.
Conclusion: The demand of excise duty, the penalty and the invocation of the extended period were not sustainable; the assessee succeeded.
Ratio Decidendi: Where capital goods continue to remain installed in the same premises after lease of a portion of the factory, and the facts are disclosed to and approved by the department, there is no removal attracting duty under Rule 57-S and no basis for invoking extended limitation or penalty under Section 11A.
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