Cenvat credit for 100% EOU treated as existing law, with remand for verification of records before denial.

A Board circular clarifying Cenvat credit for a 100% EOU was treated as declaratory of the existing law, so entitlement to credit could not be denied merely because the circular was issued later. The denial was also unsustainable because the lower authorities had not verified whether the disputed inputs were duly reflected in the assessee's books and excise records. The order was set aside and the matter remanded for fresh adjudication after factual verification of the relevant records.

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Issues: Whether the clarification contained in Board Circular No. 799/32/2004-CX dated 23.09.2004 regarding availability of Cenvat credit to a 100% EOU was only declaratory of the existing legal position, and whether the denial of credit could be sustained without verifying the books and excise records.

Analysis: The denial of credit was not founded on suppression or fraud, and the record showed that the appellant asserted accounting of the disputed inputs in its books. The exclusion of credit by the lower appellate authority rested solely on the view that entitlement for a 100% EOU arose only after the Board circular. The circular was treated as a clarification of the existing legal position and not as the source of the right itself. Since the lower authorities had not examined whether the goods were duly recorded in the appellant's books and excise records, the factual foundation for deciding admissibility of credit was incomplete.

Conclusion: The clarification was held to be retrospective in nature and the matter required factual verification before a fresh decision on entitlement to credit.

Final Conclusion: The impugned order was set aside and the matter was sent back for fresh adjudication after verification of the relevant records.

Ratio Decidendi: A Board circular clarifying entitlement to credit operates as a declaration of the existing law and cannot, by itself, postpone a statutory benefit where the factual eligibility remains to be verified.

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