Double duty demand barred on captively used transferred factory goods where no clandestine removal or revenue loss was shown.

Transferred factory goods captively consumed in the manufacture of dutiable final products could not be subjected to a second duty demand where the record showed no clandestine removal, suppression of facts, or revenue loss. The sale of the unit as a going concern and the purchaser's later excise registration supported the transfer transaction, and the alleged false sale arrangement was rejected. Although commencing activity before amendment of registration amounted to a procedural lapse attracting the cited rules and notification, that lapse did not justify the disputed duty demand. The confirmed demand was set aside, while the limited penalties for procedural contravention remained undisturbed.

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Issues: Whether the duty demand could be sustained when the factory had been sold as a going concern, the subsequent purchaser had used the goods captively in manufacture of dutiable final products, and the evidence showed no suppression of facts or evasion of duty.

Analysis: The sale deed and related registration materials showed that the unit had been transferred to the purchaser and that the purchaser had later obtained excise registration. The finding that the sale arrangement was false was rejected. The goods were captively consumed in the manufacture of final products on which duty had been paid, and a further demand on the same goods would amount to double recovery. The procedural lapse in commencing activity before amendment of registration attracted the cited rules and notification, but that did not establish clandestine removal or justify the disputed duty demand.

Conclusion: The duty demand was not sustainable and the Revenue's challenge failed.

Final Conclusion: The impugned order setting aside the confirmed demand was upheld, while the limited penalties for procedural contravention remained undisturbed.

Ratio Decidendi: Where transferred factory goods are captively consumed in the manufacture of dutiable final products and the record shows no clandestine clearance or revenue loss, a second duty demand on the same goods is not justified, though procedural registration lapses may still attract penalty.

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