Duty on used capital goods follows transaction value; Cenvat credit reversal provisions do not apply, defeating the revenue challenge.

On removal of capital goods after use, duty is payable on the transaction value, and the Cenvat credit reversal provisions under Rule 3(4) of the 2002 Rules and Rule 3(5) of the 2004/2005 Rules are not attracted. The analysis follows Tribunal precedent, including the later Mumbai Bench view affirmed by the Bombay High Court, which supported the same interpretation. On that basis, the duty demand on the used capital goods was treated as not sustainable, and the Revenue's appeal failed.

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Issues: Whether duty was payable on removal of capital goods after use on their transaction value under Rule 3(5) of the Cenvat Credit Rules.

Analysis: The demand had been dropped by following Tribunal precedent holding that, on removal of capital goods after use, duty is payable on the transaction value and the reversal provisions under Rule 3(4) of the Cenvat Credit Rules, 2002 and Rule 3(5) of the Cenvat Credit Rules, 2004/2005 were not attracted. The later view of the Mumbai Bench, affirmed by the Bombay High Court, supported the same interpretation.

Conclusion: The duty demand on removal of the used capital goods was not sustainable, and the Revenue's appeal failed.

Ratio Decidendi: On removal of capital goods after use, duty is payable on transaction value and the Cenvat credit reversal provisions are not attracted.

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