Revenue-neutral transfer of capital goods between units of the same manufacturer defeats differential duty and penalty.

Capital goods transferred from one unit of the same manufacturer to another unit after intimation to the department were treated as revenue neutral, because any higher duty paid on removal would have been available as credit to the receiving unit. The Tribunal noted that the goods were not installed in the first factory and were ultimately used by the same legal entity in another factory, consistent with the rule permitting use of capital goods in the manufacturer's factory of final products. On that basis, the differential duty demand and consequential penalty were held unsustainable, and the appellate order was left undisturbed.

---

---

Issues: Whether capital goods received by one unit of a manufacturer and later moved, after intimation to the department, to another unit of the same manufacturer attracted differential duty as if manufactured and cleared by the first unit; and whether the demand and penalty could be sustained in the facts of the case.

Analysis: The capital goods were received by one unit, were not installed there, and were later removed to another unit of the same legal entity. The removal had been intimated to the departmental authorities. The Tribunal noted that, if a higher duty amount had been paid at the time of removal, the same would have been available as credit to the other unit, making the situation revenue neutral. It also found that the governing rule permitted use of capital goods in the factory of the manufacturer of final products, and the goods were in fact used by the same manufacturer, though in a different factory.

Conclusion: The duty demand and consequential penalty were not sustainable, and the order of the Commissioner (Appeals) required no interference.

Ratio Decidendi: Where capital goods are transferred between units of the same manufacturer after intimation to the department and the transaction is revenue neutral, differential duty and penalty are not warranted merely because the goods were used in a different factory.

---