Used Cenvated capital goods sold as machinery were not liable to duty under the removal rule, with demand set aside.

Used Cenvated capital goods sold after debonding were held outside the rule requiring duty payment on removal of capital goods as such. The Tribunal found that the Board circular relied on applied only to capital goods removed in the same condition, and the cited Cenvat Credit Rules did not create a duty demand on sale of used machinery on transaction value in these facts. The proposed demand, along with interest and penalty, therefore could not be sustained, and the assessee obtained relief on the substantive duty issue.

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Issues: Whether duty could be demanded on the removal and sale of used Cenvated capital goods, and whether the relevant Cenvat Credit Rules and circular covered such goods.

Analysis: The appeal concerned removal of machinery after debonding and subsequent sale of used capital goods on payment of duty on transaction value. The disputed demand was founded on the amount of Cenvat credit taken, along with interest and penalty. The Tribunal held that the Board's circular relied upon applied only to capital goods removed as such, and not to used Cenvated capital goods. It further found that the cited Cenvat Credit provisions did not provide for duty demand on removal of used machinery in the facts of the case.

Conclusion: Duty was not payable on the sale of the used machinery, and the demand, interest and penalty could not stand.

Final Conclusion: The assessee succeeded on the substantive dispute over duty liability on used capital goods, with consequential relief following.

Ratio Decidendi: Used Cenvated capital goods sold as used machinery are not covered by the rule requiring duty payment on removal of capital goods as such, and no duty demand can be sustained on that basis absent a specific enabling provision.

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