Prospective operation of fiscal reversal rules prevents retrospective demand for validly earned Cenvat credit.

Rule 11(3) of the Cenvat Credit Rules, 2004 was treated as prospective, so it could not be used to require reversal of accumulated unutilized Cenvat credit validly earned before its insertion on 01.03.2007. The text applies the settled fiscal principle that a provision imposing a burden is presumed to operate prospectively unless Parliament clearly indicates retrospective effect. On that basis, credit taken before the amendment could not be demanded back merely because the final product later became exempt. The resulting demand for reversal was therefore held unsustainable, and the assessee's challenge succeeded.

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Issues: Whether Rule 11(3) of the Cenvat Credit Rules, 2004 could be invoked retrospectively to require reversal of accumulated unutilized Cenvat credit of Additional Duty of Excise (Textile & Textile Articles) taken before the rule came into force, after the relevant duty was exempted.

Analysis: The credit in question had been validly earned and carried forward before the insertion of Rule 11(3) on 01.03.2007. The rule creating liability to reverse credit on exemption of the final product contains no indication of retrospective operation. In fiscal law, absent clear legislative intent, a provision imposing a burden is presumed to operate prospectively. The Tribunal followed its earlier view and other binding precedent holding that credit legitimately taken before the amendment could not be demanded back by applying Rule 11(3) to an earlier period.

Conclusion: Rule 11(3) of the Cenvat Credit Rules, 2004 could not be applied retrospectively, and the demand for reversal of the accumulated credit was unsustainable; the finding is in favour of the assessee.

Final Conclusion: The impugned order was set aside and the assessee's appeal was allowed.

Ratio Decidendi: A fiscal provision imposing reversal of validly availed credit is presumed prospective unless the statute clearly provides otherwise, and credit accrued before such provision cannot be denied by retrospective application.

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