Retrospective validating amendment defeated the Cenvat credit demand where the relevant period was expressly covered.

A retrospective validating amendment can remove the legal basis of a Cenvat credit demand where the disputed period is expressly covered. The text explains that credit on steel wire input had been questioned on the earlier view that wire drawing from wire rods was not manufacture and no duty was payable, but the Taxation Laws (Amendment) Act, 2006 retrospectively validated duty on wire drawing units for the relevant period. A departmental circular also directed pending matters to be decided in light of that amendment, so the demand for credit, interest and penalty could not survive and the assessee's relief was sustained.

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Issues: Whether the demand of Cenvat credit, along with interest and penalty, could survive in view of the retrospective amendment validating duty on wire drawing units for the relevant period.

Analysis: The dispute arose from credit taken on steel wire used as input, on the premise that drawing of wire from wire rods did not amount to manufacture and, therefore, no duty was payable on the wire. The retrospective legislation, namely the Taxation Laws (Amendment) Act, 2006, gave legal backing to excise duty paid by wire drawing units for the period covered by the dispute. The subsequent departmental circular also directed that pending demands of this nature be decided in the light of the retrospective amendment. In that statutory setting, the earlier basis for denying credit ceased to survive.

Conclusion: The demand confirmed by the Adjudicating Authority could not survive, and the Revenue's appeal was rejected.

Final Conclusion: The retrospective amendment neutralised the basis of the duty demand, with the result that the assessee's relief granted by the Commissioner (Appeals) stood sustained.

Ratio Decidendi: Where a retrospective validating amendment expressly covers the relevant period, a demand founded on the prior legal position cannot be sustained.

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