CENVAT credit on sold capital goods may hinge on transfer of ownership and control; penalty fails without suppression.

Transfer of ownership in capital goods, coupled with effective transfer of control, may amount to "removal" for CENVAT credit purposes even if the machinery remains at the same premises. The text distinguishes cases where ownership changes without a corresponding shift in control, and notes that contextual reading of precedent is essential. Because material facts remained disputed on whether control of the plant and premises had passed to the transferee, the credit issue required fresh factual verification on remand. On penalty, the demand was within the normal limitation period and disclosure had been made to the department; in the absence of suppression, misdeclaration, or similar culpable conduct, penalty was not sustainable in a purely interpretative dispute.

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Issues: (i) Whether CENVAT credit on capital goods sold to another legal entity but retained within the same premises could be recovered as having been removed from the factory for the purposes of the CENVAT Credit Rules, 2004; (ii) Whether penalty was imposable under the CENVAT Credit Rules, 2004 read with the Central Excise Act, 1944.

Issue (i): Whether CENVAT credit on capital goods sold to another legal entity but retained within the same premises could be recovered as having been removed from the factory for the purposes of the CENVAT Credit Rules, 2004.

Analysis: The governing question was whether transfer of ownership, coupled with transfer or retention of control, amounted to removal even without physical shifting of the machinery from the premises. The reasoning distinguished cases where ownership was irrelevant because the goods remained with the same manufacturing arrangement under the supplier's duty reversal, and relied on the principle that judgments must be read in context. The decision also examined the line of authority treating sale of an entire unit with continued use in the same premises as a transaction amounting to removal for excise purposes. At the same time, it was noted that material factual disputes remained on whether effective control over the lime kiln plant had actually passed and whether the land had been leased or otherwise placed at the transferee's disposal.

Conclusion: The credit issue required fresh factual examination on remand, with the governing principle being that sale of capital goods with transfer of ownership and control may amount to removal for the purpose of recovery of credit.

Issue (ii): Whether penalty was imposable under the CENVAT Credit Rules, 2004 read with the Central Excise Act, 1944.

Analysis: The demand had been issued within the normal period and the facts concerning sale and use of the plant had been disclosed to the department. In the absence of established suppression, misdeclaration, or comparable culpable conduct, penalty could not be sustained on a mere interpretative dispute over admissibility of credit.

Conclusion: Penalty was not imposable.

Final Conclusion: The dispute on credit entitlement was sent back for factual verification, while the penal component was set aside for want of suppression or other penal ingredients.

Ratio Decidendi: For excise credit purposes, transfer of ownership together with effective transfer of control over capital goods may constitute removal even if the machinery remains in the same , but penalty cannot follow where the dispute is purely interpretative and suppression is not established.

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