Retrospective excise amendment protected CENVAT credit on wires, making the demand, interest and penalty unsustainable.

CENVAT credit on duty paid on wires drawn from wire rods was treated as admissible because the retrospective amendment to Rule 16 of the Central Excise Rules, 2002 by Section 39 of the Taxation Law (Amendment) Act, 2006 treated wire-drawing units as assessees where duty had already been paid on cleared wires. The later notification also protected credit taken for the earlier relevant period. On that basis, the purchaser was entitled to credit, and the demand for reversal, together with interest and penalty, could not survive. The denial of credit was set aside in favour of the assessee.

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Issues: Whether CENVAT credit on duty paid on wires drawn from wire rods was admissible in view of the retrospective amendment to the excise law.

Analysis: The credit dispute turned on the legal effect of the amendment made by Section 39 of the Taxation Law (Amendment) Act, 2006 to Rule 16 of the Central Excise Rules, 2002, which treated wire-drawing units as assessees where duty had been paid on wires cleared by them. The later notification also protected credit already taken for the relevant earlier period. On that basis, duty paid on the wires was eligible for credit in the hands of the purchaser, and the contrary demand and penalty could not survive.

Conclusion: The credit was held to be admissible and the denial of credit, interest and penalty was set aside in favour of the assessee.

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