Used capital goods cleared as scrap are not removal "as such"; duty must be computed on depreciated value.

Used and worn capital goods cleared after use as scrap are not treated as removal of capital goods "as such" for demanding reversal of the entire Cenvat credit. The applicable framework distinguishes between unused goods removed in original condition and goods cleared after being put to use; here, the records showed the rollers and machinery had lost utility and required further processing, so full credit reversal was unsustainable. For such clearances, duty is to be worked out on depreciated value, with only any differential duty recoverable after re-quantification. Any excess duty already paid does not create further liability in this proceeding.

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Issues: (i) Whether used and worn out cylinders, printing rollers and old machinery cleared on payment of duty as scrap could be treated as capital goods removed as such so as to demand reversal of the entire credit availed; (ii) Whether, in respect of such clearances, the duty liability was confined to the value arrived at after allowing depreciation and any excess duty already paid required no further payment.

Issue (i): Whether used and worn out cylinders, printing rollers and old machinery cleared on payment of duty as scrap could be treated as capital goods removed as such so as to demand reversal of the entire credit availed.

Analysis: The goods were found to be used and worn out capital goods, not goods removed as such in the sense contended by Revenue. The applicable Cenvat credit framework distinguished between removal of capital goods as such and clearance of capital goods after use, and the later amendment specifically dealt with clearance as waste and scrap. The record showed that the rollers had lost utility and could not be used in printing without further processing, indicating that they were not being cleared in the same condition as originally received.

Conclusion: The demand for reversal of the entire credit was not sustainable in favour of the assessee.

Issue (ii): Whether, in respect of such clearances, the duty liability was confined to the value arrived at after allowing depreciation and any excess duty already paid required no further payment.

Analysis: For used capital goods cleared after putting them to use, the valuation had to be on depreciated value, consistent with the settled view applied in earlier decisions and the Board's valuation approach. Since duty had already been paid on the transaction value declared at clearance, the department could only seek differential duty, if any, by reworking the assessable value after allowing depreciation. If such re-quantification resulted in excess payment, no further amount would be payable, and the assessee would not be entitled to refund in this proceeding.

Conclusion: The duty demand was restricted to the value arrived at after allowing depreciation, with re-quantification directed in favour of the assessee.

Final Conclusion: The appeals succeeded to the extent that the impugned demand could not proceed on the footing of full credit reversal for removal of capital goods as such, and the original authority was required to rework the liability on depreciated value alone.

Ratio Decidendi: Used capital goods cleared after being put to use are not to be treated as removal of capital goods as such for demanding reversal of the entire Cenvat credit; duty, if any, is to be determined on the depreciated value of the goods at clearance.

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