Used capital goods are not removed "as such" under Cenvat credit rules, so full credit reversal is not required.

Capital goods that have been put to use before removal are not removed "as such" within Rule 3(5) of the Cenvat Credit Rules, 2004. On that interpretation, where machinery had been used in manufacture for several years and was later cleared with reversal of only part of the credit, reversal of the entire Cenvat credit originally taken was not required. The Madras HC affirmed that the expression "removed as such" applies to capital goods removed without prior use, so used capital goods fall outside that provision.

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Issues: Whether capital goods removed after being put to use for several years are to be treated as removed "as such" so as to require reversal of the full Cenvat credit under Rule 3(5) of the Cenvat Credit Rules, 2004.

Analysis: The Court followed its earlier view that the expression "removed as such" applies to capital goods removed without being put to use. Where the machinery had been used in manufacture for about eight years and was then cleared on reversal of only part of the credit, the rule did not require reversal of the entire credit originally availed. The Tribunal's view that used capital goods do not fall within the expression "as such" was affirmed.

Conclusion: The issue was answered in favour of the assessee and against the Revenue. Full reversal of credit was not warranted on removal of used capital goods.

Ratio Decidendi: Capital goods that have been put to use before removal are not removed "as such" within the meaning of Rule 3(5) of the Cenvat Credit Rules, 2004, and therefore do not attract reversal of the entire credit originally taken.

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