I moved to NJ in May 06 from California.
However my employers deducted CA taxes on my salary for the full year. My W-2 shows CA taxes only. Plese advise what should I do

You need to file a part-year resident for BOTH Calfornia and New Jersey.

You will owe NJ taxes, because no taxes were withheld from your salary. You need to fix that for 2007.

You should get a refund from California, because you will only pay taxes to California on the salary earned while IN California.