Cenvat credit reversal on removal as such: worn-out used parts of capital goods were outside Rule 3(4), so the demand failed.

Rule 3(4) of the Cenvat Credit Rules, 2002 applies only where inputs or capital goods on which CENVAT credit was taken are removed as such from the factory. On the facts, the cleared goods were worn-out used parts of capital goods, not capital goods removed as such, so the rule did not apply. The Tribunal also noted that the same controversy in the assessee's own case had already been decided in the same manner, while the Revenue's cited authorities were fact-specific and inapplicable. The demand could not stand.

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Issues: Whether Rule 3(4) of the Cenvat Credit Rules, 2002 applied to clearance of worn-out scrap, used parts, or capital goods from the factory, so as to require payment equal to the credit availed.

Analysis: The liability under Rule 3(4) arises only when inputs or capital goods on which CENVAT credit has been taken are removed as such from the factory. On the facts found, the goods cleared were worn-out parts of capital goods and not capital goods removed as such. The same controversy in the appellant's own case had already been decided by the Tribunal in the same manner, and the contrary authorities cited for the Revenue were held to be inapplicable on their facts.

Conclusion: Rule 3(4) was held inapplicable to the clearance of worn-out used parts and capital goods. The demand could not stand and the appeal succeeded in favour of the assessee.

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