Cenvat credit reversal on used capital goods: transaction value on sale was treated as sufficient under Rule 3(5).

Clearance of used capital goods after substantial use was treated as outside the scope of Rule 3(5) of the Cenvat Credit Rules, 2004, because that provision applied to removal of inputs or capital goods "as such" and did not expressly govern used assets during the relevant period. On that reasoning, reversal of Cenvat credit based on the transaction value realised on sale was considered sufficient, rather than reversal of the entire credit originally availed. The note reflects the Tribunal's view that the credit reversal requirement was limited to the value realised on disposal in such circumstances.

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Issues: Whether, on clearance of capital goods after use, the assessee was required to reverse the entire Cenvat credit originally taken or whether reversal on the transaction value realised on sale was sufficient under Rule 3(5) of the Cenvat Credit Rules, 2004.

Analysis: The relevant rules did not contain an express provision governing clearance of used capital goods during the material period. Rule 3(5) applied where inputs or capital goods were removed as such, but that expression was held not to cover capital goods cleared after substantial use. The Tribunal followed the view that, in such a situation, reversal of credit based on the transaction value of the used capital goods was adequate.

Conclusion: The assessee was not required to reverse the entire credit originally taken and the appeal was allowed.

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