Cenvat credit reversal on removal as such cannot apply to worn-out parts of used capital goods cleared from the factory.

Rule 3(4) of the Cenvat Credit Rules, 2002 applies only where inputs or capital goods on which credit has been taken are removed as such from the factory. Where the goods were admittedly used capital goods and only worn-out parts were cleared, the statutory condition of removal as such was not met. Accordingly, duty could not be demanded under Rule 3(4), and the demand was unsustainable.

---

---

Issues: Whether duty could be demanded under Rule 3(4) of the Cenvat Credit Rules, 2002 on clearance of worn out parts of capital goods when the goods were not removed as such.

Analysis: Rule 3(4) applies only when inputs or capital goods on which CENVAT credit has been taken are removed as such from the factory. The goods in question were admittedly used capital goods and only their worn out parts were cleared without payment of duty. Since the statutory condition of removal as such was not satisfied, the provision could not be invoked to demand duty.

Conclusion: The demand was not sustainable under Rule 3(4) of the Cenvat Credit Rules, 2002 and the assessee succeeded.

---