Vested Cenvat credit on Light Diesel Oil could not be reversed by a later input-definition amendment and circular.

Cenvat credit validly taken on Light Diesel Oil received in the factory before 01.03.2003 could not be withdrawn by a later amendment excluding that item from the definition of input. Rule 3 of the Cenvat Credit Rules, 2002 allowed credit on eligible inputs, and Rule 4(1) permitted credit to be taken immediately on receipt in the factory; once credit was lawfully earned under the then-existing definition, it crystallised as a vested right. The subsequent amendment by Notification No. 13/2003-C.E. (N.T.) was not retrospective, and a circular could not require reversal of credit on pre-amendment stock. The challenge to the notice and circular therefore succeeded, and the assessee could retain the credit.

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Issues: Whether Cenvat credit validly availed on Light Diesel Oil received in the factory before 01.03.2003 could be withdrawn by a later amendment excluding Light Diesel Oil from the definition of input and by a circular directing reversal of such credit.

Analysis: Rule 3 of the Cenvat Credit Rules, 2002 allowed credit on eligible inputs, and Rule 4(1) permitted credit to be taken immediately on receipt of inputs in the factory. Light Diesel Oil was within the definition of input until the amendment made by Notification No. 13/2003-C.E. (N.T.) dated 01.03.2003. The amendment was not retrospective, and Rule 4(1) was not altered. Credit validly earned on receipt of the input therefore crystallised into a vested right, which could not be taken away by a subsequent change in the definition of input or by a circular requiring reversal of credit on pre-amendment stock.

Conclusion: The challenge to the notice and the circular succeeded, and the assessee was entitled to retain the Cenvat credit already availed on Light Diesel Oil received before 01.03.2003.

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