Rule 3(5) governs removal of Cenvat-credit inputs as such, requiring reversal of credit rather than transaction-value duty.

Where inputs or capital goods are removed as such after Cenvat credit is availed, Rule 3(5) of the Cenvat Credit Rules, 2004 requires payment of an amount equal to the credit taken. The note states that a later Board circular superseded the earlier circular and clarified that this rule, not transaction value under Section 4 of the Central Excise Act, governs such removals. On that basis, the demand based on transaction value could not be sustained, and the issue was treated as favouring the assessee.

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Issues: Whether, on removal of inputs or capital goods as such after availing Cenvat credit, the amount payable is governed by Rule 3(5) of the Cenvat Credit Rules, 2004 so that the credit availed is payable, or whether duty is to be computed on the transaction value under Section 4 of the Central Excise Act.

Analysis: The clarification issued by the Board in the later circular stated that it superseded the earlier circular and specifically clarified that, where inputs or capital goods on which credit had been taken are removed as such, Rule 3(5) of the Cenvat Credit Rules, 2004 applies. That rule requires payment of an amount equal to the credit availed in respect of such inputs or capital goods. In view of this express clarification and the statutory text, the demand could not be sustained on the basis of transaction value under Section 4.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Final Conclusion: The reference was decided for the assessee and the appeal was allowed.

Ratio Decidendi: When inputs or capital goods on which Cenvat credit has been taken are removed as such, Rule 3(5) governs the payment obligation, and the amount payable is the credit availed, not the transaction value under Section 4.

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