Cenvat credit on used capital goods must be tested under the relevant period's rule position, with reconsideration under Larger Bench guidance.

Treatment of used capital goods removed by an assessee had to be examined under the Cenvat credit rules applicable to the relevant period, and the statutory framework, including the amended rule position and the departmental circular, had to be applied in the light of the Larger Bench ruling. As the impugned order did not properly apply that ruling, it was set aside and the matter was remanded for fresh adjudication after hearing the assessee.

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Issues: Whether duty on used capital goods removed by the assessee was required to be demanded by reversing the entire Cenvat credit, and whether the matter should be decided in the light of the Larger Bench ruling on the applicable rule position for the relevant period.

Analysis: The dispute turned on the treatment of capital goods after use and the effect of the change in the Cenvat credit regime over different periods. The Larger Bench had examined the earlier rule, the 2004 Cenvat Credit Rules, the subsequent amendment, and the departmental circular, and had concluded that the issue must be understood with reference to the statutory framework applicable during the relevant period. The impugned order did not adequately apply that ruling. Since the Larger Bench decision had already considered the change in law and the relevant legal position, the adjudication required reconsideration in its light, with opportunity of hearing to the assessee.

Conclusion: The impugned order was set aside and the matter was remanded to the adjudicating authority for fresh decision in accordance with the Larger Bench ruling.

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