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Issues: Whether the amendment to Rule 57C of the Central Excise Rules, 1944 excluding clearances to a Free Trade Zone or a hundred per cent Export-Oriented Unit was clarificatory and retrospective, and whether MODVAT credit on inputs used in such clearances was admissible for the period prior to 01.03.1992.
Analysis: The unamended Rule 57C barred credit where the final product was exempt from the whole of duty or chargeable to nil rate. The amendment introduced on 01.03.1992 carved out an express exception for goods cleared to a Free Trade Zone or a hundred per cent Export-Oriented Unit. That change created a new entitlement and did not merely explain an existing one. The Court held that Rule 191BB and the general exemption notification operated in a different field, dealing with removal of excisable goods without payment of duty or with a separate exemption scheme, and did not govern admissibility of MODVAT credit under Rule 57C. The amendment therefore could not be treated as clarificatory or applied retrospectively.
Conclusion: The amendment was substantive and prospective, and MODVAT credit was inadmissible for the period before 01.03.1992.
Final Conclusion: The assessee was not entitled to relief against reversal of credit, and the Tribunal's view sustaining inadmissibility of the credit was upheld.
Ratio Decidendi: Where an amendment introduces a new exception to a provision that earlier barred credit, the amendment is substantive and operates prospectively unless the statutory text clearly shows a merely clarificatory intent.
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