CENVAT credit utilisation under amended Rule 3(3) held unrestricted for the relevant period, defeating the interest demand.

The amended Rule 3(3) of the Cenvat Credit Rules, 2002 was examined to determine whether the restriction on utilising CENVAT credit, based on the balance available on the last day of the month, applied during the relevant period. The substituted rule introduced by Notification No. 18/2003-C.E. (N.T.) did not contain that restrictive proviso, and the contemporaneous statutory text was treated as showing that the restriction was not operative. On that basis, utilisation of credit for payment of duty was not contrary to the rules, and the associated demand for interest had no foundation. The assessee was therefore entitled to utilise the credit and obtain refund of the interest paid.

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Issues: Whether the restriction on utilisation of CENVAT credit under Rule 3(3) of the Cenvat Credit Rules, 2002 was in force for the relevant period, and whether the assessee was therefore entitled to utilise the credit and obtain refund of interest paid.

Analysis: The statutory scheme and the amended text of Rule 3(3) were examined with reference to the relevant notifications. The substituted form of Rule 3(3), brought in by Notification No. 18/2003-C.E. (N.T.) dated 13-3-2003, did not contain the proviso restricting utilisation of credit to the balance available on the last day of the month. The contemporaneous statutory book was treated as showing that the restrictive proviso was not part of the operative rule for the relevant period. In that situation, utilisation of credit for payment of duty could not be held contrary to the rules, and the consequential demand of interest also lacked foundation.

Conclusion: The assessee was held entitled to utilise the CENVAT credit and to refund of the interest amount paid; the Revenue's challenge failed.

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