Retrospective effect and Cenvat credit: later relief did not validate DEPB-based duty payment, though equal penalty was waived.

Cenvat credit was held inadmissible where the additional customs duty on imported goods was discharged through DEPB credit, because the later notification removing the embargo did not operate retrospectively in the absence of clear legislative intent. The disallowance of credit was therefore confirmed. On penalties, the later relief to similarly placed assessees was treated as a mitigating factor, so the equal penalty was waived. However, the separate penalty for violation of the Cenvat Credit Rules was sustained because undue credit had been taken for a substantial period.

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Issues: (i) Whether Cenvat credit was admissible in respect of additional customs duty discharged through DEPB credit, and (ii) whether the penalties imposed, including equal penalty and the penalty for rule violation, were liable to be sustained.

Issue (i): Whether Cenvat credit was admissible in respect of additional customs duty discharged through DEPB credit.

Analysis: The additional customs duty on the imported goods had not been paid in cash but was discharged through DEPB credit. The later notification removing the impediment to such credit was issued after the import and could not be treated as operating retrospectively in the absence of legislative intent. The subsequent relief for similarly placed cases did not undo the embargo that existed during the relevant period.

Conclusion: Cenvat credit was not admissible, and the disallowance of the credit was confirmed against the assessee.

Issue (ii): Whether the penalties imposed, including equal penalty and the penalty for rule violation, were liable to be sustained.

Analysis: The later notification and the resulting relief to similarly situated assessees constituted a mitigating circumstance for the period in question, justifying waiver of the equal penalty. However, the separate penalty for violation of the Cenvat Credit Rules was upheld because undue credit had been taken for a substantial period.

Conclusion: The equal penalty was waived, while the penalty of Rs. 50,000 was confirmed.

Final Conclusion: The appeal succeeded only to the limited extent of relief from the equal penalty, while the disallowance of Cenvat credit and the separate rule-based penalty were maintained.

Ratio Decidendi: A subsequent notification removing a fiscal embargo does not apply retrospectively unless such retrospective intent is ; it may, however, justify waiver of penalty where the earlier position created a bona fide hardship.

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