Cenvat credit reversal on packing material is inapplicable where the rule covers only capital goods.

Rule 3(5A) of the Cenvat Credit Rules, 2004 applies only to capital goods and not to packing materials used in connection with packing capital goods. Packing material cannot be treated as capital goods for invoking the credit reversal provision. The factual position still required verification to determine whether only packing materials had been cleared, so the matter was remitted to the adjudicating authority for that limited factual examination.

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Issues: Whether Rule 3(5A) of the Cenvat Credit Rules, 2004 applies to packing materials used for packing capital goods, and whether the matter required verification of the nature of the goods cleared.

Analysis: The rule was held to apply only to capital goods. Packing material, even if used in connection with packing capital goods, could not be treated as capital goods for the purpose of invoking the credit reversal provision. At the same time, the actual factual position needed verification to determine whether only packing materials had been cleared.

Conclusion: Rule 3(5A) of the Cenvat Credit Rules, 2004 does not apply to packing materials. The matter was remitted to the adjudicating authority for verification of facts.

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