CENVAT credit on CVD paid through DEPB became admissible after policy amendment, while the earlier demand was time-barred.

Removal of the restrictive words in Para 4.3.5 of the EXIM Policy restored eligibility for CENVAT credit on CVD paid through debit in DEPB for clearances after 28.01.2004, so denial of credit for the post-amendment period was unsustainable. For the earlier period, the absence of evidence of mala fide intent or suppression meant the dispute remained one of interpretation, and the extended period of limitation was not invocable. The commentary states that the denial of credit and the confirmed demand were unsustainable, with the assessee succeeding on both merits and limitation.

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Issues: (i) Whether CENVAT credit was admissible on CVD paid through debit in DEPB for clearances after the amendment removing the prohibition in Para 4.3.5 of the EXIM Policy; (ii) Whether the demand for the period prior to the amendment was barred by limitation.

Issue (i): Whether CENVAT credit was admissible on CVD paid through debit in DEPB for clearances after the amendment removing the prohibition in Para 4.3.5 of the EXIM Policy.

Analysis: The amendment removing the restrictive words in Para 4.3.5 was treated as restoring eligibility for credit. Since most bills of entry related to the period after 28.01.2004, and there was then no prohibition against availing credit of CVD paid through DEPB, the denial of credit for that period was unsustainable. The conclusion was also supported by the later judicial view that the earlier restrictive reading could not govern the post-amendment period.

Conclusion: The credit was admissible for the bills of entry falling after 28.01.2004, in favour of the assessee.

Issue (ii): Whether the demand for the period prior to the amendment was barred by limitation.

Analysis: For the earlier period, the record did not disclose any mala fide intention to avail ineligible credit. The dispute turned on interpretation of the credit eligibility, and in such circumstances the extended period was not invocable. The demand for the pre-amendment period was therefore held to be time-barred.

Conclusion: The demand for the period prior to 28.01.2004 was barred by limitation, in favour of the assessee.

Final Conclusion: The denial of credit and the confirmed demand were unsustainable, and the assessee succeeded on both merits and limitation.

Ratio Decidendi: Where a restrictive policy condition governing CENVAT credit is removed, credit becomes admissible for the post-amendment period, and in a bona fide interpretational dispute the extended period of limitation cannot be invoked absent evidence of suppression or mala fide conduct.

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