Retrospective Cenvat credit amendment cannot sustain demand where AED(GSI) credit was re-credited and precedent controlled the dispute.

Retrospective amendment of Rule 3(6) of the Cenvat Credit Rules, 2002 and Section 88(3) of the Finance Act (No. 2), 2004 was considered in relation to accumulated AED(GSI) credit and its cross-utilisation for duty payment on tyres. The dispute was treated as covered by binding precedent in CEAT Ltd., where similar proceedings had been dropped on identical facts, and the Tribunal's view was found consistent with that precedent. As the disputed credit had been re-credited, no legal infirmity was found in accepting the assessee's position, and the demand was held not to survive; the questions of law were answered in favour of the assessee.

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Issues: Whether the assessee was entitled to retain and utilize the accumulated AED(GSI) credit in view of the amended Rule 3(6) of the Cenvat Credit Rules, 2002 and the retrospective amendment under Section 88(3) of the Finance Act (No.2), 2004, and whether the demand confirmed by the Department could survive.

Analysis: The assessee had initially availed credit of AED(GSI) and used it for payment of duty on tyres after the amendment to Rule 3(6) permitted cross-utilisation. The amount in dispute was thereafter re-credited by the assessee. The dispute was found to be covered by the decision of the Bombay High Court in CEAT Ltd., which had upheld dropping of similar proceedings in identical circumstances. The Tribunal's order was consistent with that view, and no legal infirmity was found in accepting the assessee's position.

Conclusion: The questions of law were answered in favour of the assessee and against the Revenue, and the demand did not survive.

Ratio Decidendi: Where a similar dispute is already covered by binding precedent and the disputed credit stands re-credited, the retrospective amendment does not sustain the demand or penalty.

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