Time limit for CENVAT credit under Rule 4(7) extended to one year, benefit applied where credit was availed within that period

Extension of the CENVAT credit time limit from six months to one year was held to have prospective operative effect and to afford benefit to assessees who availed credit within the extended one year period; consequently credits availed within one year of invoice issuance cannot be denied. The note emphasises that restrictive fiscal provisions are not to be applied retrospectively and that beneficial amendments extending claim periods should be given effect, with reliance on tribunal precedent supporting allowance of disputed credits and dismissal of revenue challenge to those credits.

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Issues: Whether the amendment to Rule 4(7) of the CENVAT Credit Rules, 2004 (imposing time limit for availing CENVAT credit) operates prospectively so that credit availed within one year of invoice issuance (after Notification No.21/2004-C.E.(N.T.) dated 11.07.2014 and Notification No.06/2015-C.E.(N.T.) dated 01.03.2015) cannot be denied for invoices issued prior to the amendment.

Analysis: The Tribunal examined the effect of Notification No.21/2004-C.E. (N.T.) dated 11.07.2014 (effective 01.09.2014) which inserted a six-month time limit in Rule 4(7), and the subsequent Notification No.06/2015-C.E. (N.T.) dated 01.03.2015 extending the period to one year. The Tribunal noted that invoices in dispute were issued prior to the amendment coming into force and applied the principle that restrictions introduced by later statutory amendment cannot retrospectively divest an assessee of an existing statutory right to take CENVAT credit where the conditions for credit (receipt of service/goods and payment of tax) were met. The Tribunal relied on its earlier decision in EM Services (I) Pvt. Ltd. and concluded that the amended time limitation is prospective and the benefit of the extended one-year period applies to the appellant's disputed invoices which were availed within one year.

Conclusion: The amendment to Rule 4(7) operates prospectively; the CENVAT credit availed by the appellant within one year of invoice issuance cannot be denied. The appeal of the assessee is allowed and the Revenue's appeal is dismissed.

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