Used capital goods are not cleared as such; Cenvat reversal is limited and duty applies on depreciated value.

Capital goods removed after actual use are not cleared "as such" for Cenvat credit purposes. The settled distinction is that full reversal of credit applies when goods are removed without use, whereas used capital goods attract valuation on depreciated value. The scheme of Cenvat credit is intended to prevent cascading of duty, and the amended rule from 13-11-2007 recognises the difference between removal as such and removal after use. On that basis, duty is payable only on the depreciated value of the capital goods, and not on full credit reversal.

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Issues: Whether capital goods removed after use can be treated as cleared "as such" for reversal of Cenvat credit, or whether duty is payable only on the depreciated value of the capital goods.

Analysis: The ruling applied the settled principle that capital goods used over a period of time do not retain the same character as goods cleared without use. The scheme of Cenvat credit is intended to prevent cascading of duty, and the liability to reverse credit at full value arises where capital goods are cleared "as such", not where they are removed after actual use. The reasoning also recognised the distinction introduced in the amended rule from 13-11-2007 between removal without use and removal after use, and relied on the view that clearance after use attracts valuation on depreciated value rather than full credit reversal.

Conclusion: Used capital goods removed after being put to use are not cleared "as such", and duty is payable on the depreciated value; the assessee succeeds on the issue.

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