Prospective amendment to Cenvat credit rules preserved credit on construction materials taken before the exclusion date.

The amendment to Rule 2(k) of the Cenvat Credit Rules, 2004 excluding cement, steel and similar construction materials from the definition of inputs was held to operate prospectively because the amending notification did not show any clear legislative intent to apply retrospectively. As a result, Cenvat credit taken before 07.07.2009 on goods used for construction of factory sheds, buildings, foundations and related support structures remained admissible. The Tribunal rejected the Revenue's contention that the amendment was merely clarificatory and therefore could be used to deny credit for the earlier period.

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Issues: Whether the amendment to Rule 2(k) of the Cenvat Credit Rules, 2004 excluding certain construction materials from the definition of inputs was retrospective or prospective, and whether Cenvat credit taken on such goods for construction of factory shed, building and foundations for capital goods was allowable for the period prior to 07.07.2009.

Analysis: The amendment inserted by Notification No. 16/2009 dated 07.07.2009 excluded cement, steel items and similar materials used for construction of factory shed, building, foundation and support structures from the scope of inputs. The Tribunal noted that the Revenue relied on the view that the amendment was merely clarificatory and therefore retrospective. However, the assessee relied on later judicial authorities holding that the amendment was not clarificatory and that nothing in the amending notification showed an intention to operate retrospectively. On that basis, the exclusion introduced with effect from 07.07.2009 could not be applied to credit taken before that date. The Tribunal therefore accepted the view that the amendment operated only prospectively.

Conclusion: The amendment to Rule 2(k) of the Cenvat Credit Rules, 2004 was held to be prospective only, and the Cenvat credit taken before 07.07.2009 on the disputed materials was held to be admissible in favour of the assessee.

Ratio Decidendi: An amendment excluding goods from the definition of inputs, absent clear legislative indication of clarification, operates prospectively and cannot be applied to deny Cenvat credit already taken for the prior period.

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