Removal of capital goods is governed by the rule in force on clearance, not the date of original credit

Liability on removal of capital goods as such is governed by the rule in force on the date of clearance, not by the date on which credit was originally taken. Here, capital goods were removed in May 2003, when the Cenvat Credit Rules, 2002 applied; Rule 3(4) required payment of an amount equal to the credit availed on such removal. The earlier taking of credit in 1994 did not take the clearance outside the 2002 regime. The appeal succeeded, the Commissioner (Appeals) order was set aside, and the adjudication order was restored.

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Issues: Whether Rule 3(4) of the Cenvat Credit Rules, 2002 applied to the clearance of capital goods made in May 2003, and whether the amount equivalent to the credit availed was payable on such removal.

Analysis: The capital goods were cleared in May 2003, when the Cenvat Credit Rules, 2002 were in force. The relevant rule required the manufacturer to pay an amount equal to the credit availed when inputs or capital goods on which credit had been taken were removed as such from the factory. The fact that the credit had originally been taken in 1994 did not make the later clearance outside the scope of the 2002 Rules, because the applicable legal regime was the one prevailing at the time of removal.

Conclusion: Rule 3(4) of the Cenvat Credit Rules, 2002 applied, and the assessee was liable to follow that rule on clearance of the capital goods.

Final Conclusion: The appeal succeeded, the order of the Commissioner (Appeals) was set aside, and the adjudication order was restored.

Ratio Decidendi: The law in force on the date of removal governs liability arising from clearance of capital goods removed as such, notwithstanding that the credit was originally taken earlier under a different regime.

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