Retrospective amendment to CENVAT recovery rules required fresh adjudication of liability for inputs used in exempted goods.

Retrospective amendments to Rule 57AD and the later insertion of sub-rule (5) changed the legal basis for recovery of the amount attributable to CENVAT credit on inputs used in exempted goods, including interest. The earlier view on recovery could not be sustained without applying the amended statutory framework. The impugned order was therefore set aside and the dispute was remitted for fresh adjudication after hearing the assessee, with all issues left open.

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Issues: Whether the retrospective amendments to Rule 57AD of the Central Excise Rules, 1944 altered the legal position governing recovery of the amount attributable to inputs used in exempted goods, so that the impugned order required reconsideration.

Analysis: The retrospective amendment made by Section 82 of the Finance Act, 2005, together with the later insertion of sub-rule (5) by the Finance Act, 2010, expressly provided for recovery of the amount equivalent to CENVAT credit attributable to inputs used in or in relation to exempted goods, along with interest, for the relevant period. In light of this statutory change, the earlier view on recovery could not stand without reconsideration on the amended legal basis. As the amended framework governed the dispute, the matter required fresh adjudication after hearing the assessee.

Conclusion: The impugned order was set aside and the matter was remitted for fresh decision in accordance with law, with all issues kept open.

Final Conclusion: The appeal succeeded to the extent that the earlier order was vacated and the dispute was sent back for de novo adjudication under the retrospective amendment regime.

Ratio Decidendi: A retrospective statutory amendment altering the liability for recovery in exempted-goods situations requires the original adjudication to be reopened and decided afresh under the amended law.

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