Used capital goods and CENVAT credit reversal: clearance after substantial use was treated under the specific rule for used goods.

Used capital goods cleared from a factory after substantial use were distinguished from goods removed "as such". The applicable CENVAT credit rule, as amended, prescribed a separate method for clearance of used capital goods by reducing the credit taken by a specified percentage for each quarter from the date of availment. The Tribunal noted that High Court decisions had already favoured the assessee on this distinction, and the clearance was therefore not treated as removal "as such" for purposes of reversing the full credit. Interim relief was granted on that basis.

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Issues: Whether used capital goods cleared from the factory after substantial use were removable "as such" so as to require reversal of the full CENVAT credit taken, or whether liability was to be worked out under the provision applicable to removal of used capital goods.

Analysis: The dispute turned on the distinction between removal of capital goods "as such" and removal of capital goods after use. The applicable credit rule, as amended, provided a specific method for determining the amount payable on clearance of used capital goods by reducing the CENVAT credit taken by a prescribed percentage for each quarter from the date of taking credit. The Tribunal noted that the issue had already been decided by the High Courts in favour of the assessee.

Conclusion: The clearance was not treated as removal of capital goods "as such" and the assessee's position was accepted for the purpose of interim relief.

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