Transfer of captive power unit with lease of premises can amount to removal for excise purposes despite no physical shifting.

A transfer of a captive power unit for consideration, coupled with a long-term lease of the same premises, was treated as removal of capital goods for Central Excise purposes because the assessee lost ownership and control over the unit. Physical shifting of the machinery was not required where the arrangement effectively placed the unit in the purchaser's hands and operated as a device to avoid excise liability by relying only on continued location at the site. The HC rejected the assessee's challenge, upheld the revenue's demand, and sustained the interest and penalty consequences.

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Issues: Whether the sale of the captive power unit along with a long-term lease of the premises amounted to removal of capital goods so as to attract recovery of duty, interest and penalty under the Central Excise law.

Analysis: The agreement was construed as an absolute transfer of the power unit for valuable consideration, with the purchaser taking over the unit and operating it at the same premises under a long-term lease. The assessee lost ownership and control over the capital goods, and the arrangement was treated as effectively bringing about removal of the unit for excise purposes, notwithstanding the absence of physical shifting of the machinery. The transaction was viewed as a device to avoid excise liability by relying on mere physical location.

Conclusion: The transaction attracted the penal and recovery provisions; the assessee's challenge failed and the finding was against the assessee.

Final Conclusion: The appellate tribunal's view was rejected, and the revenue's demand, interest and penalty-related consequences were sustained.

Ratio Decidendi: A transfer of capital goods coupled with a lease of the premises, resulting in loss of ownership and control, can amount to removal for excise purposes even without physical displacement of the goods.

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