Cenvat credit on pre-amendment stock cannot be reversed by later exclusion of light diesel oil.

An amendment excluding light diesel oil from Cenvat credit could not be applied to stock already lying in existence before 1-3-2003. The Court applied the settled principle that credit rights accrued under the earlier scheme cannot be taken away retrospectively by a later amendment. It held that the circular directing reversal of credit on pre-amendment stock was invalid, because the goods were governed by the unamended regime when the credit accrued. The assessee was therefore entitled to retain the Cenvat credit on the existing stock.

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Issues: Whether the impugned circular could require reversal of Cenvat credit on light diesel oil lying in stock on 28-2-2003 after the amendment to Rule 2(g) of the Cenvat Credit Rules, 2002.

Analysis: The amended rule enlarged the exclusion to include light diesel oil with effect from 1-3-2003, but the credit in question related to stock already existing and dealt with under the unamended scheme. The Court applied the principle that credit rights which have accrued under the existing scheme cannot be taken away by a later amendment so as to operate on goods already covered by the earlier regime. Relying on the settled position affirmed by the Supreme Court, it held that the amended rule could not be pressed into service to deny or reverse credit on stock that had come into existence before the amendment took effect.

Conclusion: The circular directing reversal of credit on the pre-1-3-2003 stock of light diesel oil was invalid, and the assessee was entitled to avail the credit.

Final Conclusion: The amendment was held to have no application to stock lying prior to its commencement, and the assessee's accrued Cenvat credit was protected.

Ratio Decidendi: An amendment excluding an input from Cenvat credit cannot be applied retrospectively to take away credit that had already accrued in respect of stock governed by the earlier scheme.

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