Retrospective withdrawal of vested Cenvat credit rejected; transitional credit already availed under the earlier notification remained protected.

Transitional Cenvat credit under Rule 9A(3) for textile stock was treated as a vested benefit once validly availed under Notification No. 35/2003-CE. The later Notification No. 47/2003-CE, which amended the notified table, was held not to operate retrospectively because no express retrospective language authorised withdrawal or reduction of credit already earned. Subordinate legislation could not curtail an accrued tax entitlement after the assessee had computed and availed the credit under the earlier notification. The assessee's claim to the transitional credit was upheld, and the disallowance of credit, demand, interest and penalty was set aside.

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Issues: Whether the assessee was entitled to avail Cenvat credit under Rule 9A(3) of the Cenvat Credit Rules, 2002 on the basis of Notification No. 35/2003-CE dated 10.4.2003, and whether the subsequent amendment by Notification No. 47/2003-CE dated 17.5.2003 could be applied retrospectively to reduce or withdraw that credit.

Analysis: Rule 9A provided a transitional scheme for textile and textile articles, enabling credit on inputs or finished goods lying in stock as on 31.3.2003, to be calculated in the manner notified by the Central Government. Notification No. 35/2003-CE implemented that scheme and permitted the assessee to compute credit under the entry applicable to fabrics lying in stock. The later notification substituted an amended table, but the credit had already been availed on the basis of the earlier notification before the amendment came into force. The Court treated the credit already earned as an accrued benefit and held that, in the absence of express retrospective language, the amendment could not be used to take away a vested entitlement. It further held that subordinate legislation could not operate retrospectively so as to withdraw a benefit already granted under the statutory rule.

Conclusion: The assessee's claim to the transitional Cenvat credit was upheld, and the subsequent notification was held not to operate retrospectively against credit already availed.

Final Conclusion: The appeals succeeded, and the orders disallowing credit, demand, interest and penalty were set aside.

Ratio Decidendi: A subordinate legislative notification, absent express retrospective words, cannot retrospectively withdraw or curtail a vested tax credit already validly accrued and availed under the governing rule.

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