Retrospective Rule 16 amendment and CBEC clarification barred reversal of CENVAT credit on drawn wire.

Retrospective amendment to Rule 16 of the Central Excise Rules regularised the position of wire drawing units for the relevant period by treating the amount paid as duty and permitting corresponding CENVAT credit treatment. The CBEC circular clarified that the amendment was intended to validate credit already taken at the input stage and duty payment on drawn wire, and not to impose any additional liability on units covered by the amendment. On that basis, the demand for reversal of credit on drawn wire was unsustainable and the confirmation orders were set aside in favour of the assessee.

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Issues: Whether the demand for reversal of CENVAT credit taken on drawn wire was sustainable in view of the retrospective amendment to Rule 16 of the Central Excise Rules, 1944 and the applicable CBEC circular.

Analysis: The retrospective amendment to Rule 16 was intended to regularise the position of wire drawing units for the relevant period by treating the amount paid as duty and allowing corresponding credit treatment. The Board's circular clarified that the amendment was meant to facilitate and regularise credit already taken at the input stage and duty payment on drawn wire, and that it would not create additional liability for the units covered by the amendment. In that view, the issue was no longer res integra and the demands could not be sustained.

Conclusion: The demand for reversal of credit was unsustainable and the orders confirming demand were set aside in favour of the assessee.

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