2010 (3) TMI 60 - HC - Central Excise

Cenvat Credit Amendment in rule 9A - Transitional provisions for Textile and Textile Articles. demand on the basis of amended provision much after the date of availing cenvat credit held that - The argument of learned counsel for the revenue that since the amount of cenvat credit is required to be calculated as per the amended provisions of Notification No.47/2003-CE dated 17.5.2003, so the assessee availed the same in excess, is not only devoid of merit but misplaced as well, because entry at Serial No.2 of the Table was only substituted on 17.5.2003, much after the availing of the cenvat credit by the assessee on inputs lying in stock as on 31.3.2003. - It is now well settled proposition of law that such benefit already granted to the assessee cannot possibly be withdrawn by applying the subsequent amendment retrospectively. If the intention of the authority was to apply the subsequent amendment retrospectively, then it ought to have been specifically mentioned that it will operate retrospectively. In the absence of the same, such amendment would operate prospectively. Moreover, the benefit already granted to the assessee under the statutory Rule 9A(3) cannot be taken away by issuance of notification by the subordinate legislation, because the subordinate legislation has neither any power nor jurisdiction to issue such notification with retrospective effect withdrawing the benefit already accrued and availed by it (assessee).

Issues Involved:
1. Whether the assessee correctly availed Cenvat credit under Rule 9A(3) of the Cenvat Credit Rules, 2002, as per Notification No.35/2003-CE dated 10.4.2003.
2. Whether the subsequent amendment by Notification No.47/2003-CE dated 17.5.2003 can be applied retrospectively to disallow the Cenvat credit already availed by the assessee.

Issue-wise Detailed Analysis:

1. Correct Availment of Cenvat Credit:

The assessee, engaged in the manufacture of Knitted Fabrics and Garments, availed deemed Cenvat credit under Rule 9A(3) of the Cenvat Credit Rules, 2002, based on Notification No.35/2003-CE dated 10.4.2003, for goods in stock as of 31.3.2003. Upon scrutiny, the department issued a show cause notice alleging excess availing of Cenvat credit and sought recovery along with interest and penalty under Rule 12 of the Rules read with section 11A of the Central Excise Act, 1944.

The assessee defended its position, asserting that the credit was correctly claimed under the then applicable Notification No.35/2003-CE and that the subsequent amendment (Notification No.47/2003-CE dated 17.5.2003) should not apply retrospectively. However, the Assessing Authority disallowed the credit, ordered recovery, and imposed a penalty, which was upheld by the Commissioner (Appeals) and partially by the Tribunal (penalty set aside but duty demand upheld).

2. Retrospective Application of Subsequent Amendment:

The core issue was whether the subsequent amendment (Notification No.47/2003-CE dated 17.5.2003) applied retrospectively to disallow the Cenvat credit availed under the earlier notification. The Tribunal's decision was based on the assumption that the amendment operated retrospectively.

The High Court analyzed Rule 9A and the relevant notifications, emphasizing that the assessee availed the credit under Rule 9A(3) and Notification No.35/2003-CE dated 10.4.2003, which was valid at the time. The Court noted that the subsequent amendment did not explicitly state it would operate retrospectively. It held that a valuable right had accrued to the assessee under the original notification, which could not be withdrawn retrospectively without explicit legislative intent.

The Court further reasoned that subordinate legislation (like the notification in question) lacks the power to retrospectively withdraw benefits already granted under statutory rules unless explicitly stated. Thus, the amendment by Notification No.47/2003-CE could only operate prospectively.

Conclusion:

The High Court concluded that the assessee was entitled to the Cenvat credit under Rule 9A(3) of the Rules read with Notification No.35/2003-CE dated 10.4.2003, and the subsequent amendment by Notification No.47/2003-CE dated 17.5.2003 did not apply retrospectively. Consequently, the impugned orders disallowing the credit and ordering recovery were set aside.

Final Judgment:

The appeals were accepted, and the impugned orders (Annexures P2 to P4) were set aside, affirming the assessee's entitlement to the Cenvat credit as originally claimed.

*(Mehinder Singh Sullar, Judge; Ashutosh Mohunta, Judge; 4.3.2010)*

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