CENVAT credit on supplementary invoices upheld where cost escalation was genuine and later restriction could not apply retrospectively.

Supplementary invoices reflecting bona fide cost escalation under the parties' commercial arrangements were treated as valid documents for CENVAT credit where the escalated amounts formed part of project cost and cost of manufacture. Credit was admissible even for invoices issued before 29-8-2000, because the later notification was enabling in nature and did not prohibit earlier invoices. The subsequent restriction could not be applied retrospectively, so the amount covered by the invoice dated 23-8-2000 was not disqualified. As the duty had been paid on the escalated cost and the invoices evidenced that escalation, denial of credit was unjustified and the demand, interest and penalty were set aside.

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Issues: Whether CENVAT credit taken on supplementary invoices was admissible where the invoices related to cost escalation, including invoices issued before and after 29-8-2000, and whether the amendment to the credit provisions could be applied retrospectively.

Analysis: The supplementary invoices were found to represent genuine cost escalation under the commercial agreements between the parties, including facility charges, power charges, differential price and income-tax surcharge forming part of the project cost and cost of manufacture. The credit on invoices issued before 29-8-2000 was held to be admissible because the later notification only made supplementary invoices eligible documents and did not impose a bar on invoices issued earlier. The amount taken on Invoice No. 3149 dated 23-8-2000 was also held not to be hit by the later amendment, as the amended restriction could not operate retrospectively. The demand was therefore unsustainable since the duty had been paid on the escalated cost and the invoices reflected that escalation.

Conclusion: The credit was admissible, the denial of credit was unjustified, and the assessee succeeded.

Final Conclusion: The order confirming demand, interest and penalty was set aside and the appeal was allowed.

Ratio Decidendi: Where supplementary invoices evidence bona fide cost escalation forming part of the assessable value, credit cannot be denied merely because the invoices were issued before a later enabling notification or because a subsequent restriction was introduced without retrospective effect.

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