Retrospective CENVAT credit proviso treated as clarificatory, extending benefit on removal of used capital goods.

The 2007 proviso added to Rule 3(5) of the CENVAT Credit Rules, 2004 was treated as clarificatory and retrospective because it carried forward the position found in the 2002 Rules and reflected the earlier Rule 57-S(2)(b) framework for reducing credit on removal of used capital goods. The omission of the proviso from the 2004 Rules was viewed as a legislative slip, so the amendment restored the intended operation of the rule from the time the 2004 Rules commenced. As a result, the proviso applied to removal of used capital goods made in 2005, and the assessee was entitled to its benefit.

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Issues: Whether the 2007 proviso added to Rule 3(5) of the CENVAT Credit Rules, 2004 was clarificatory in nature and operated retrospectively, so as to apply to removal of used capital goods made in 2005.

Analysis: The proviso had existed in the earlier CENVAT Credit Rules, 2002, and was in line with Rule 57-S(2)(b) of the Central Excise Rules, 1944, which provided for reduction of credit by 2.5 per cent for each quarter of use when capital goods were removed after being used. The omission of the proviso in the 2004 Rules was treated as a legislative slip. The 2007 amendment merely clarified the position and restored the provision to its intended form, making it applicable from the time the 2004 Rules came into force.

Conclusion: The 2007 amendment was clarificatory and retrospective, and the assessee was entitled to the benefit of the proviso under Rule 3(5) of the CENVAT Credit Rules, 2004.

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