Credit reversal on capital goods removed as such can satisfy the excise compliance requirement, defeating a separate duty demand.

Reversal of credit on capital goods removed as such from the factory was treated as sufficient compliance under the relevant credit scheme, so a separate duty demand under Rule 57S(1)(ii) of the Central Excise Rules, 1944 was not sustainable on the facts noted. The analysis relied on the Board circular stating that, for removal of inputs or capital goods as such, credit reversal alone discharged the obligation, and it also drew support from the earlier Larger Bench view on comparable removals of inputs. The resulting effect was that no further duty survived and the assessee's position was upheld.

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Issues: Whether reversal of credit on capital goods removed as such from the factory was sufficient compliance, or whether duty was payable under Rule 57S(1)(ii) of the Central Excise Rules, 1944.

Analysis: The dispute concerned capital goods removed in 1999. Rule 57S(1)(ii) required removal of capital goods after obtaining permission from the proper officer and on payment of appropriate duty as if the goods had been manufactured in the factory. The Tribunal noted that the Board circular clarified that, for removal of inputs or capital goods as such, reversal of credit was sufficient under the relevant credit regime. The reasoning was also supported by the earlier Larger Bench view applied to the comparable rule governing inputs removed as such, where reversal of credit was treated as adequate compliance.

Conclusion: Reversal of credit was held sufficient, and no further duty demand survived under Rule 57S(1)(ii) on the facts of the case.

Final Conclusion: The revenue appeal failed, and the order allowing the assessee's claim was sustained.

Ratio Decidendi: Where capital goods or inputs are removed as such and the governing credit scheme treats reversal of credit as sufficient compliance, a separate duty demand is not sustainable merely because the goods were cleared from the factory.

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