Cenvat credit reversal requires physical removal of capital goods; mere transfer of ownership is not enough.

Transfer of a captive power plant to another legal entity, without physical movement of the capital goods from the factory premises, does not amount to "removal" for reversal of Cenvat credit under Rule 3(4) of the Cenvat Credit Rules, 2002. The operative test is physical movement of goods from one place to another; mere change in ownership is insufficient to attract the charging provision. On that basis, the provision was held inapplicable on the stated facts, and no amount equivalent to the credit taken on the capital goods was payable.

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Issues: Whether transfer of a captive power plant to another legal entity, without physical shifting of the capital goods from the factory premises, amounts to removal attracting liability under Rule 3(4) of the Cenvat Credit Rules, 2002.

Analysis: The dispute turned on the meaning of "removal" for purposes of credit reversal. The Tribunal noted that the capital goods were not physically moved from the premises and that the transaction involved only a change in ownership. Relying on the settled meaning of removal as physical movement of goods from one place to another, and agreeing with the line of decisions holding that mere transfer of title does not by itself amount to removal, the Tribunal held that the charging provision was not attracted. The contrary view based on sale of the power plant was not accepted in the facts of the case.

Conclusion: Rule 3(4) of the Cenvat Credit Rules, 2002 was not applicable on the facts, and no amount equivalent to the credit taken on the capital goods was payable.

Final Conclusion: The demand of central excise duty was unsustainable, and the revenue appeal failed.

Ratio Decidendi: For reversal of Cenvat credit under Rule 3(4), "removal" requires physical movement of the goods from one place to another, and mere transfer of ownership without physical removal does not attract the provision.

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