Used capital goods cleared as scrap do not trigger full Cenvat credit reversal when removed after long factory use.

Cenvat credit on capital goods need not be reversed when used capital goods are cleared as scrap after several years of use, because reversal is triggered only on removal "as such". The Tribunal noted that the goods were not removed in the condition in which they were received, but after long factory use, and relied on Board circulars and earlier decisions indicating that duty on such removals is to be determined after allowing depreciation. On that basis, duty paid on transaction value was treated as correct and the assessee's position was accepted.

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Issues: Whether Cenvat credit originally taken on capital goods was required to be reversed when the capital goods, after being used in the factory for several years, were cleared as scrap on payment of duty on transaction value.

Analysis: The capital goods were not removed in the condition in which they were received, but after having been used in the factory for about 7 to 8 years. The governing rule required reversal only where capital goods were removed "as such". The Board circulars relied upon by the earlier decision also indicated that duty on removed capital goods was to be determined after allowing depreciation. The Tribunal further relied on its earlier decisions holding that removal of used capital goods does not amount to removal "as such" and therefore does not trigger reversal of the full credit originally availed.

Conclusion: The credit originally availed was not required to be reversed and the duty paid on transaction value was held to be correct; the appeal was decided in favour of the assessee.

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