Retrospective deletion of Rule 57R(8) bars denial of Modvat credit on capital goods under the amended law.

Retrospective deletion of Rule 57R(8) removed the sole basis for denying Modvat credit on capital goods. The amendment by the Finance Act, 2003 operated retrospectively, so the restrictive provision could not continue to support the credit disallowance. With the revenue not disputing that the provision had been deleted retrospectively, the foundation for denial ceased to exist. The assessee was therefore entitled to the benefit of the retrospective amendment, and the credit denial was unsustainable.

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Issues: Whether Modvat credit on capital goods could be denied by invoking Rule 57R(8) when that provision had been retrospectively deleted by amendment.

Analysis: The denial of credit rested solely on Rule 57R(8). The rule was retrospectively amended by the Finance Act, 2003, and the basis on which credit had been denied stood deleted. The revenue did not dispute this factual position. Once the restrictive provision ceased to exist retrospectively, the foundation for denying credit was removed.

Conclusion: The denial of Modvat credit was unsustainable, and the assessee was entitled to the benefit of the retrospective amendment.

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