CENVAT credit admissible where duty is paid through an alternative mechanism; clarificatory amendment applies retrospectively.

CENVAT credit was treated as admissible on imports cleared against Duty Free Credit Entitlement certificates where duty was discharged through an alternative payment mechanism, because the liability to duty itself was not disputed and the notifications were viewed as procedural modes of payment after assessment. Denial of credit was rejected under the CENVAT Credit Rules, 2004 merely because the duty had been paid through that mechanism. The 2005 amendment was regarded as clarificatory, and the circular was read as supporting retrospective application. As the recipient was an exporter, refusal of credit was considered inconsistent with export promotion and would only create avoidable collection and refund steps.

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Issues: Whether CENVAT credit was admissible on imports cleared against Duty Free Credit Entitlement certificates where duty was discharged through the alternative duty payment mechanism, and whether the 2005 amendment and the subsequent circular operated retrospectively.

Analysis: The dispute concerned only the manner in which duty was discharged, since the existence of duty liability was not in question. The notifications relied upon were treated as procedural and as providing an alternative mode of discharging duty after assessment. The exclusionary stand taken by Revenue was rejected because the CENVAT Credit Rules, 2004 did not warrant denial of credit merely because the duty had been discharged through that alternative mechanism. The amendment was viewed as clarificatory, and the circular was treated as supporting retrospective application. As the respondent was an exporter, denying credit would only create unnecessary collection and refund exercise without advancing the object of export promotion.

Conclusion: CENVAT credit was held to be admissible and the Revenue's appeal failed.

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