Cenvat credit restoration after retrospective utilisation bar upheld where earlier debits were neutralised by PLA payment.

Validly earned Cenvat credit of Additional Excise Duty remained capable of restoration after a retrospective restriction limited future utilisation, because the amendment did not extinguish the underlying credit already accrued on duty-paid inputs. Once the assessee reversed the earlier utilisation and discharged the liability through PLA as required, the original debits were treated as neutralised rather than as a final exhaustion of the credit account. The Kerala HC thus treated equivalent restoration of the credit as legally justified, and the Revenue's objection based on excess-duty refund principles and the bar on suo motu credit did not apply to this restoration exercise.

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Issues: Whether the assessee was entitled to retain and restore the accumulated credit of Additional Excise Duty and utilise it in the manner permitted after the budgetary amendment, despite the later retrospective restriction on credit earned prior to 01.04.2000.

Analysis: The credit had been legitimately earned on duty-paid inputs and was utilisable after the relaxation introduced from 01.03.2003. The later amendment restricted utilisation of credit of Additional Excise Duty paid on or after 01.04.2000 for payment of duties under the Central Excise Tariff, but did not disturb the underlying credit already validly accrued. Once the assessee was required to reverse the earlier utilisation and pay the duty through PLA, the debits initially made could not be treated as having exhausted the credit account, and restoration of the equivalent amount was legally justified. The precedent relied on by the Revenue concerning excess duty refund and the prohibition on suo motu credit did not govern this situation, because the case concerned restoration of valid Cenvat credit after the earlier utilisation was statutorily neutralised, not a claim for refund of excess duty.

Conclusion: The assessee had no right to challenge the restoration of credit, and the Revenue's objection to such restoration failed.

Ratio Decidendi: Where validly earned Cenvat credit is retrospectively rendered unavailable for a particular mode of utilisation and the assessee subsequently discharges the liability through PLA as required, the equivalent credit is liable to be restored and the earlier debits do not constitute a final extinction of the credit.

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