Cenvat credit on used capital goods is limited to depreciated value, not full reversal on clearance.

On clearance of long-used capital goods, only the Cenvat credit attributable to the depreciated value was recoverable; full reversal of the credit originally availed was not required. Applying the Larger Bench view, the Madras High Court ruling in Rogini Mills, and the relevant C.B.E. & C. circular, the liability was limited to the amount computed on depreciated value rather than the entire original credit. As the assessee had already reversed more than that amount, the demand could not be sustained, and the penalty and interest were set aside.

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Issues: Whether, on clearance of capital goods after long use, the assessee was required to reverse the entire Cenvat credit originally availed or only the amount computed on the depreciated value in terms of the applicable circular.

Analysis: The applicable legal position was taken from the Larger Bench view following the Madras High Court decision in Rogini Mills and the C.B.E. & C. circular, under which used capital goods are not treated for full credit reversal merely because they are later cleared. The liability is confined to the amount computed on depreciated value. On the facts, the amount already reversed by the assessee exceeded the amount that could be demanded on that basis.

Conclusion: The assessee was not liable to pay the entire credit originally taken; the demand could not be sustained, and the penalty and interest were set aside.

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