Prospective application of CENVAT credit limitation bars denial for prior invoices, while bona fide interpretation defeats penalty.

A procedural restriction on availing CENVAT credit introduced by amendment applies prospectively from its effective date and cannot be used to deny credit on invoices issued before that date. On that basis, the time-bar-related disallowance of credit was held unsustainable and set aside. The remaining dispute over construction-related input services was not pressed in full, but the penalty was separately examined and set aside because the credit issue arose from a bona fide interpretation of the rule. The balance credit disallowance was maintained.

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Issues: (i) whether the six-month limitation introduced for availing cenvat credit by Notification No. 21/2014-CE (N.T.) dated 11.07.2014 applied to invoices issued before 01.09.2014; and (ii) whether the denial of cenvat credit on construction-related input services and the consequential penalty were sustainable.

Issue (i): whether the six-month limitation introduced for availing cenvat credit by Notification No. 21/2014-CE (N.T.) dated 11.07.2014 applied to invoices issued before 01.09.2014.

Analysis: The amendment to Rule 4(7) of the Cenvat Credit Rules, 2004 was brought into force only from 01.09.2014. The limitation could not be applied to credit relatable to invoices issued before that date. The issue was treated as settled and the amendment was held to operate prospectively.

Conclusion: The disallowance of cenvat credit of Rs. 1,04,80,736/- on the ground of delay was unsustainable and was set aside in favour of the assessee.

Issue (ii): whether the denial of cenvat credit on construction-related input services and the consequential penalty were sustainable.

Analysis: The assessee did not press the balance credit dispute after reversal of a substantial amount, but contended that penalty could not survive because the credit had been taken under a bona fide interpretation of the rule. The penalty was examined separately from the credit demand.

Conclusion: The demand relating to Rs. 1,75,320/- was upheld, but the penalty was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded only in part, with the time-bar-based denial of credit and the penalty being set aside, while the balance credit disallowance was maintained.

Ratio Decidendi: A procedural restriction on availing cenvat credit introduced by amendment applies prospectively from its effective date and cannot be used to deny credit on invoices issued before that date; penalty is not justified where the dispute turns on bona fide interpretation of the credit provisions.

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