CENVAT credit on used capital goods need not be reversed for pre-amendment removals after use.

CENVAT credit on capital goods did not require reversal when used capital goods were removed from the factory before the 13-11-2007 amendment. The rule then in force required payment only where inputs or capital goods were removed "as such", which was interpreted as removal without prior use. Applying the earlier pari materia rule and the later amendment introduced by Notification No. 39/2007, the Tribunal treated the pre-amendment position as not covering capital goods already put to use. The assessee therefore succeeded, and the demand, interest, and penalty could not be sustained on the basis adopted in the impugned order.

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Issues: Whether CENVAT credit taken on capital goods was required to be reversed when the capital goods were removed after use, for the period prior to the amendment introducing a specific provision for used capital goods.

Analysis: The relevant rule provided for payment of an amount only when inputs or capital goods were removed "as such". The Court treated the expression as referring to capital goods removed without being put to use. Relying on the interpretation of the pari materia earlier rule and the subsequent amendment brought in by Notification No. 39/2007, the Court held that, before 13-11-2007, there was no liability to reverse credit on used capital goods removed from the factory after use. The contrary authorities cited by the Revenue were distinguished as dealing with different questions.

Conclusion: The credit was not required to be reversed on removal of used capital goods for the relevant period, and the issue was decided in favour of the assessee.

Final Conclusion: The demand, interest, and penalty could not survive on the basis adopted in the impugned order, and the appeal succeeded.

Ratio Decidendi: Prior to the amendment expressly dealing with used capital goods, the expression "removed as such" did not cover capital goods that had already been put to use.

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