Physical removal of capital goods is required for excise credit reversal; mere sale or transfer does not trigger duty.

For excise credit reversal, capital goods are treated as "removed" only when they are physically taken out of the factory premises. Mere sale or transfer of ownership, including transfer by sale or lease of capital goods used in a co-generation plant, does not by itself amount to removal under the relevant credit reversal rule. On that settled interpretation, the deeming fiction for duty reversal is not triggered unless there is actual physical removal, and earlier decisions on transfer of a power plant or division were followed on identical facts.

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Issues: Whether sale or transfer of capital goods used in a co-generation plant amounts to "removal" of capital goods so as to attract duty under the erstwhile credit reversal provision and sustain penalty.

Analysis: The relevant provision required duty payment when inputs or capital goods were removed from the factory. The decisive expression was "removed", not sale or transfer. The settled interpretation applied by the Tribunal and the jurisdictional High Court is that removal in excise law means physical removal from the factory premises. Where capital goods are transferred by sale or lease without such physical removal, the deeming fiction for reversal of credit is not attracted. Earlier decisions on identical facts involving transfer of a power plant or division were followed.

Conclusion: Transfer by sale of the capital goods did not amount to removal as contemplated by the rule, so the duty demand and penalty were unsustainable and were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned demand, interest and penalty were annulled, with consequential relief.

Ratio Decidendi: For excise credit reversal, capital goods must be physically removed from the factory; mere sale or transfer of ownership, without such physical removal, does not constitute removal as such under the relevant rule.

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