Meaning of "removed" under excise credit rules examined for captive power plant sale and credit reversal

The dispute concerned whether sale of a captive power plant with unused capital goods, on which Modvat credit had been taken, amounted to removal of capital goods requiring reversal of credit under Rule 57AB(1C). The Tribunal read "removed" in light of Rule 9(1) and Rule 49, noting that removal is not confined to physical shifting and that the goods were sold with the land and excluded from the factory, supporting a removal-based credit reversal view. It also recorded conflicting Tribunal decisions on the same expression and directed the matter to the Hon'ble President for constitution of a Larger Bench, leaving valuation and penalty issues open.

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Issues: Whether sale of a captive power plant along with unused capital goods on which Modvat credit had been taken amounted to removal of capital goods requiring reversal of credit under Rule 57AB(1C) of the Central Excise Rules, 1944; and whether the dispute should be referred to a Larger Bench in view of conflicting Tribunal decisions.

Analysis: The dispute turned on the meaning of "removed" in Rule 57AB(1C). The Tribunal noted that the credit scheme treats the amount payable on removal as deemed duty and that, on a combined reading of Rule 9(1) and Rule 49 of the Central Excise Rules, 1944, removal is not confined to physical shifting alone. On the admitted facts, the captive power plant and the disputed capital goods were sold along with the land and stood excluded from the appellant's factory, which supported the view that the capital goods had been removed within the meaning of the rule. The Tribunal also noticed conflicting views in earlier decisions on the same expression.

Outcome: The Tribunal directed placement of the matter before the Hon'ble President for constitution of a Larger Bench. Other related issues, including valuation and penalty, were left open.

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