Common excise registration for interlinked premises defeats duty demand and penalty on transfer of capital goods without credit reversal.

Common central excise registration was held to be available where two premises, though divided by a public road, functioned as one factory through interlinked manufacturing, common inputs, labour, administration and tax registration; refusal of combined registration was therefore unsustainable. Removal of capital goods from one registered premises to another without reversing Cenvat credit breached Rule 3(5) on its face, but once combined registration was recognised and no intent to evade duty was shown, the duty demand and penalty could not stand. The consequential demand and penal action were set aside.

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Issues: (i) whether common central excise registration could be granted for two premises separated by a public road when the manufacturing processes were interlinked; and (ii) whether removal of capital goods from one registered premises to another without reversing credit justified demand of duty and penalty.

Issue (i): whether common central excise registration could be granted for two premises separated by a public road when the manufacturing processes were interlinked.

Analysis: The applicable administrative instruction permitted separate registration for different premises unless they formed part of the same factory and were segregated by a public road, canal, or railway line. The decisive factors included common inputs, common labour, common administration, common tax registration, and other indicators of interlinked manufacturing. The goods made in the second premises were used in the first premises for manufacture and were not meant for independent sale. The premises shared several relevant indicators of functional unity, and the fact that the goods manufactured in one unit were finished goods in themselves did not negate interlinkage.

Conclusion: Common registration was rightly claimable, and refusal of such registration was unsustainable.

Issue (ii): whether removal of capital goods from one registered premises to another without reversing credit justified demand of duty and penalty.

Analysis: Rule 3(5) of the Cenvat Credit Rules, 2004 was breached because capital goods on which credit had been taken were shifted from the registered premises without reversal of credit. However, the infraction was held to be non-culpable because the appellant was entitled to combined registration for both premises and, once that position was recognized, no duty shortfall survived. In the absence of intention to evade duty, penal action under the Cenvat Credit Rules was not warranted.

Conclusion: The duty demand and penalty were liable to be set aside.

Final Conclusion: The appeals succeeded, the registration refusal was overturned, and the consequential demand and penalty were deleted.

Ratio Decidendi: Where two premises function as one factory with interlinked processes and satisfy the relevant indicators for common registration, shifting capital goods between them does not justify duty demand and penalty once the entitlement to combined registration is recognized and no intent to evade duty is established.

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