CENVAT credit on used capital goods need not be reversed when cleared after use; post-use removal is not "as such" clearance.

CENVAT credit on capital goods need not be reversed when the goods are cleared after having been put to use, because such clearance is not removal "as such" under Rule 3(5) of the CENVAT Credit Rules, 2004. The expression "as such" was read in its ordinary sense and held not to extend to used capital goods merely because they were later sent out for reconditioning or further processing. The contrary Larger Bench view on a different provision was treated as inapplicable, while the decision recognising that post-use removal does not trigger reversal was followed. As a result, the demand, interest, and penalty could not survive.

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Issues: Whether CENVAT credit taken on capital goods is required to be reversed when the goods are cleared after having been put to use, treating such clearance as removal "as such" under Rule 3(5) of the CENVAT Credit Rules, 2004.

Analysis: The operative question was whether the expression "as such" covers capital goods that had already been used in the factory before clearance. The reasoning accepted that the expression must be understood in its ordinary sense, and that the credit reversal provision could not be extended to used capital goods merely because they were later sent out for reconditioning or further processing. The earlier Larger Bench view dealing with a different provision was treated as inapplicable, while the decision holding that removal after use does not attract reversal of credit was followed as directly applicable. The Tribunal also noted that requiring reversal in such circumstances would lead to an absurd result.

Conclusion: The appellant was not required to reverse the CENVAT credit on the capital goods cleared after use, and the demand, interest, and penalty could not survive.

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