Retrospective CENVAT credit clarification for wire-drawing units bars denial of credit contrary to the Board's circular.

A retrospective amendment to Rule 16 and the accompanying CBEC circular regularised the CENVAT credit structure for wire-drawing units that had paid an amount treated as duty on drawn wire after availing input credit. The circular clarified that such payment would be regarded as duty, allowing the buyer of drawn wire to take credit, while units that had not paid duty during the relevant period would not incur additional liability. In view of this binding clarification, denial of CENVAT credit, together with the consequential demand, interest, and penalty, could not be sustained and was set aside.

---

---

Issues: Whether the disallowance of CENVAT credit and consequential demand, interest, and penalty on the ground that wire drawing did not amount to manufacture was sustainable in view of the CBEC circular and the retrospective amendment to the CENVAT Credit Rules.

Analysis: The circular clarified that the retrospective amendment to Rule 16 was intended to regularize the credit structure for wire-drawing units that had paid an amount equal to duty on drawn wire after availing credit on inputs. Such payment was to be treated as duty, and the buyer of drawn wire was entitled to credit. The circular further stated that the amendment would not create additional liability for units that had not paid duty during the relevant period. Since the departmental stand was not disputed in the face of the circular, the denial of credit could not be sustained.

Conclusion: The disallowance of CENVAT credit, along with the consequential demand and penalty, was held unsustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded because the Board's clarification and the retrospective amendment governed the credit entitlement of wire-drawing units, rendering the impugned order untenable.

Ratio Decidendi: Where a retrospective amendment and binding departmental circular regularize the availment of CENVAT credit for a specified class of assessees, denial of credit contrary to that clarification cannot be sustained.

---