Used capital goods cleared to an EHTP unit under exemption were not dutiable despite earlier Cenvat credit.

Used capital goods removed from a DTA unit to an EHTP unit under CT-3 procedure, with departmental permission and under the applicable exemption notification, were not liable to duty merely because Cenvat credit had earlier been availed. The provision governing removal of capital goods as such did not apply because the goods had been considerably used before clearance. On that basis, the duty demand was unsustainable and rejection of the refund claim was incorrect; the assessee was entitled to consequential relief.

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Issues: Whether duty could be demanded on used capital goods removed from a DTA unit to an EHTP unit under CT-3 procedure after availing Cenvat credit, and whether the refund claim arising from such duty payment was liable to be rejected.

Analysis: The capital goods were not removed as such but after considerable use, and therefore the provision dealing with removal of capital goods as such did not apply. The removal was made with departmental permission and under the benefit of the relevant exemption notification permitting supply to an EOU/EHTP unit without payment of duty. The reasoning also followed the view that where the goods are covered by a specific exemption and the goods removed are used capital goods, demand of duty is not warranted.

Conclusion: The demand of duty was not sustainable and the refund rejection was incorrect; the issue is decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the assessee obtained consequential relief.

Ratio Decidendi: Used capital goods removed with departmental permission to an eligible EOU/EHTP unit under the applicable exemption notification are not liable to duty merely because Cenvat credit had earlier been availed, since the rule governing removal of capital goods as such does not apply to such removals.

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