2004 (11) TMI 116 - HC - Central Excise

Summary

Issues:
Challenge against show cause notice proposing withdrawal of Cenvat Credit Facility on Light Diesel Oil received before 28-2-2003 due to subsequent amendment in Rule 2(g) of Cenvat Rules, 2002.

Analysis:
1. The petitioner challenged a show cause notice proposing withdrawal of Cenvat Credit Facility on Light Diesel Oil received before 28-2-2003 due to an amendment in Rule 2(g) of Cenvat Rules, 2002. The petitioner contended that the Circular of Central Board of Excise and Customs dated 31-3-2003 made the hearing before the Assessing Officer merely formal. The petitioner argued that as per Rule 4(1) of the Cenvat Rules, he was entitled to avail the credit on the raw material received by him before the amendment in Rule 2(g). The petitioner relied on previous court judgments to support his claim of the vested right to avail Cenvat Credit Facility.

2. The Court examined Rule 3 and Rule 4(1) of the Cenvat Rules, which allowed manufacturers to take Cenvat credit on inputs immediately upon receipt in the factory. The Court noted that the amendment in Rule 2(g) did not apply retrospectively to Light Diesel Oil, which was considered an eligible input until 28-2-2003. The Court emphasized that the petitioner had a vested right to avail Cenvat credit on Light Diesel Oil received before the amendment, and this right could not be taken away by subsequent changes in the rules.

3. Referring to a Supreme Court case, the Court highlighted a similar scenario where the amendment in rules affected the vested rights of the parties. The Court distinguished a previous decision cited by the Revenue, emphasizing that the petitioner's right to claim Cenvat credit on Light Diesel Oil received before the amendment was protected under Rule 4(1) of the Cenvat Credit Rules, 2002.

4. The judgment of the Karnataka High Court in a similar case was upheld, where the Court relied on the Supreme Court's decision and invalidated an impugned circular. The Supreme Court's dismissal of a Special Leave petition further supported the decision of the High Court. Consequently, the Court allowed the petition, setting aside the circular and notices requiring the reversal of Cenvat credit on Light Diesel Oil stocks as of 28th February 2003, which were permissible under Rule 4.

5. In conclusion, the Court ruled in favor of the petitioner, emphasizing the protection of vested rights under the existing rules and rejecting the retrospective application of amendments to withdraw Cenvat credit. The judgment aligned with previous legal precedents and upheld the petitioner's entitlement to the Cenvat Credit Facility on Light Diesel Oil received before the rule amendment.