2003 (12) TMI 56 - HC - Central Excise

Circular Reversal on Cenvat Credit for LDO Stock Deemed Illegal; Vested Rights Affirmed and Credit Reclaimed.

The HC determined that the Circular dated 31-3-2003, mandating the reversal of Cenvat credit on LDO stock as of 28-2-2003, was legally impermissible due ... Cenvat/Modvat - Departmental clarification - seeking to quash Circular dated 31-3-2003 and avail Cenvat Credit on LDO stock - HELD THAT:- Petitioner admittedly has cleared his goods by availing the benefits in terms of the unamended rule which excluded LDO. Amended rule including LDO has come into force on 1-3-2003. LDO lying in stock as on 28-2-2003 has already been cleared in terms of unamended Rules. Vested right has already been created in terms of the Excise laws. Therefore, respondents, in the light of the amended rule, cannot seek for reversal of stock of LDO as on 28-2-2003 in terms of Annexure-A. Same is impermissible in law. In this connection, it is pertinent to refer to a direct judgment of the Supreme Court available to the petitioner on identical facts. In the case of Samtel India Limited v. Commissioner of Central Excise, Jaipur,[2003 (3) TMI 121 - SUPREME COURT], the Supreme Court was considering the refund claim with regard to credit of duty in respect of inputs lying or contained in finished products lying in stock on the first day of March, 1977. The dictum of the Supreme Court is equally applicable to the facts of this case. The amended rule cannot be applied to the stock lying on 28-2-2003. Thus, I deem it proper to set aside the circular dated 31-3-2003 in the light of the decision of the Supreme Court in Samtel India Limited v. Commissioner of Central Excise, [2003 (3) TMI 121 - SUPREME COURT]. Since the Circular is set aside, a direction is issued to the respondents to permit the petitioner to avail back Cenvat credit of Rs. 3,41,965.00/- on the stock of LDO as on 28-2-2003. Ordered accordingly. No costs. Issues Involved: Petitioner seeking to quash Circular dated 31-3-2003 and avail Cenvat Credit on LDO stock as on 28-2-2003.Judgment Details:Issue 1: Interpretation of Cenvat Credit Rules and CircularThe petitioner, engaged in cement manufacturing, sought to avail Cenvat Credit on LDO as an input under Cenvat Credit Rules, 2002. Rule 2(g) was amended to exclude LDO as an input, and a Circular was issued requiring reversal of Cenvat credit on LDO stock as of 28-2-2003. The respondents justified their stance based on the Notification dated 1-3-2003.Issue 2: Vested Rights and Application of Amended RuleThe petitioner argued that a vested right was being withdrawn by the impugned circular, citing a Supreme Court judgment. The amended Rule, effective from 1-3-2003, included LDO as an input. However, the petitioner had already cleared goods under the unamended rule, creating a vested right under Excise laws. The Court referenced the Supreme Court's ruling in a similar case to support the petitioner's claim of vested rights.Conclusion:After considering arguments from both sides and analyzing the legal provisions, the Court found that the Circular requiring reversal of Cenvat credit on LDO stock as of 28-2-2003 was impermissible in law due to the creation of vested rights under the unamended Rule. Citing the Supreme Court's judgment, the Court set aside the Circular and directed the respondents to permit the petitioner to avail back the Cenvat credit on the LDO stock.