Cenvat credit on removal of inputs as such is limited to the credit taken, not enhanced by extra charges recovered.

On removal of inputs as such, duty liability is confined to the Cenvat credit availed on those inputs and does not extend to the transaction value by adding further charges recovered on clearance. Rule 57AB(1C) of the Central Excise Rules, 1944 and Rule 3(4) of the Central Excise Rules, 2001/Cenvat Credit Rules, 2002 create a deeming fiction only for the manner of removal; they do not treat the buyer of the inputs as their manufacturer for valuation. As the inputs were manufactured by the supplier, the duty payable on such removal cannot exceed the embedded credit element. The Larger Bench view was followed, limiting duty to the credit taken.

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Issues: Whether, on removal of inputs as such, excise duty is payable only to the extent of the Cenvat credit availed or on the transaction value by including additional charges recovered by the assessee.

Analysis: The liability under Rule 57AB(1C) of the Central Excise Rules, 1944 and Rule 3(4) of the Central Excise Rules, 2001 / Cenvat Credit Rules, 2002 applies when inputs or capital goods on which credit has been taken are removed as such from the factory. The deeming fiction in these provisions is confined to the procedure for removal and does not convert the buyer of inputs into their manufacturer for valuation purposes. Since the inputs were manufactured by the supplier and not by the assessee, the duty payable on removal as such cannot exceed the duty element already embedded in the Cenvat credit taken. The Tribunal relied on the earlier Larger Bench view that the duty liability in such cases is linked to the credit availed, not to any additional amount recovered on clearance.

Conclusion: The duty demand was unsustainable to the extent it exceeded the Cenvat credit availed, and the issue was decided in favour of the assessee.

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