Cenvat credit on used capital goods need not be reversed when scrap is cleared after long factory use and duty is paid.

Cenvat credit on capital goods was not required to be reversed where a component of the plant was cleared as waste and scrap after long use in the factory. The decisive distinction was between capital goods removed as such and goods removed after use; the record and show cause notice did not establish that the item was cleared without being used. As the goods had been used for a substantial period and duty had been paid on the transaction value on clearance as scrap, the credit already taken on the capital goods could not be denied merely because a part was later sold after use. The Revenue's challenge therefore failed.

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Issues: Whether Cenvat credit taken on capital goods was required to be reversed when a part of the capital goods, after long use in the factory, was cleared as waste and scrap on payment of duty.

Analysis: The applicable legal distinction is between capital goods cleared as such and capital goods cleared after being used. The evidence and show cause notice did not establish that the disputed item was removed without use. The record showed that the goods had been used for a substantial period and that duty had been paid on the transaction value when the part of the plant was sold as scrap. In such circumstances, the credit already availed on the entire plant could not be denied merely because a component was later cleared after use.

Conclusion: The reversal of Cenvat credit was not warranted and the Revenue's appeal failed.

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