Prospective application of Cenvat credit restrictions and absence of suppression barred extended limitation and upheld credit entitlement

A six-month time limit for taking Cenvat credit introduced by amendment applied prospectively and could not be used to deny credit on invoices issued before the amendment came into force. Credit on the balance 50% of capital goods credit was also admissible because no statutory restriction required it to be taken within six months. The demand was time-barred since the credit was recorded in Cenvat records and there was no evidence of suppression, misstatement, or mala fide intent to justify the extended limitation period. The denial of credit and consequent demand were therefore unsustainable.

---

---

Issues: (i) Whether the restriction of six months for availment of Cenvat credit under the amended credit rules applied to invoices issued before the amendment came into force; (ii) whether Cenvat credit on the balance 50% of capital goods credit could be denied in the absence of any such restriction in law; and (iii) whether the demand was barred by limitation for want of suppression or misstatement.

Issue (i): Whether the restriction of six months for availment of Cenvat credit under the amended credit rules applied to invoices issued before the amendment came into force

Analysis: The amendment introducing a six-month time limit was effective from 01.09.2014. The invoices on which credit was taken were issued prior to that date, and at the time of issuance no such time limit existed. A notification introducing a new restriction cannot be applied to past invoices so as to deny credit retrospectively.

Conclusion: The issue was decided in favour of the assessee, and the six-month restriction could not be applied to the pre-amendment invoices.

Issue (ii): Whether Cenvat credit on the balance 50% of capital goods credit could be denied in the absence of any such restriction in law

Analysis: The disputed credit related to the remaining 50% of the eligible capital goods credit. No provision was shown to require such credit to be taken within six months, and the order below itself recorded that no such legal requirement existed. In the absence of a statutory restriction, denial of the credit was unjustified.

Conclusion: The credit on capital goods was held admissible in favour of the assessee.

Issue (iii): Whether the demand was barred by limitation for want of suppression or misstatement

Analysis: The credit had been reflected in the Cenvat records, and the revenue did not produce evidence of suppression, misstatement, or any mala fide intent. In these circumstances, the extended limitation period could not be invoked.

Conclusion: The demand was barred by limitation and this issue was also decided in favour of the assessee.

Final Conclusion: The denial of Cenvat credit and the consequent demand were unsustainable, and the appeal succeeded with consequential relief.

Ratio Decidendi: A credit restriction introduced by amendment operates prospectively unless the text clearly indicates retrospective application, and the extended period of limitation cannot be invoked without evidence of suppression or wilful misstatement.

---