Retrospective denial of Modvat credit barred where a later notification cannot extinguish a pre-existing right absent express intent.

A subsequent notification limiting Modvat credit after six months could not be applied retrospectively to inputs received before its issue. The inputs were duty-paid, their receipt and use in manufacture were undisputed, and the right to credit accrued when the prescribed documents were received under Rule 57G. In the absence of an express retrospective intention, the notification could not destroy that pre-existing entitlement. Denial of Modvat credit was therefore unsustainable, and the assessee succeeded on the issue.

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Issues: Whether Notification No. 28/95, which restricted availment of Modvat credit after six months from the date of duty paying documents, could be applied retrospectively so as to deny credit in respect of inputs received before the notification.

Analysis: The inputs were received, their duty-paid character was undisputed, and their use in manufacture was not in issue. The only controversy was the temporal reach of the notification. A notification restricting credit cannot operate retrospectively unless such intention is expressly stated. The right to take Modvat credit accrued when the inputs were received with the prescribed documents under Rule 57G, and that pre-existing right could not be destroyed by a subsequent amendment made effective prospectively only.

Conclusion: The notification could not be applied retrospectively, and the denial of Modvat credit was not sustainable. The assessee succeeded on this issue.

Ratio Decidendi: In the absence of express retrospective intent, a subsequent notification cannot take away a pre-existing right to Modvat credit that had accrued before its issuance.

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