Prospective operation of Rule amendment: credits taken pre-amendment preserved; fabrication-linked inputs and pre-existing late claims allowable.

Amendment to Explanation 2 of Rule 2(k) of the CENVAT Credit Rules operates prospectively, so credits legitimately taken before the amendment remain sustainable; inputs proved by records and Chartered Engineer certification to have been used in fabrication of storage tanks, supporting structures or plant components qualify for cenvat credit as inputs/capital goods; and no statutory one year limitation barred availment of credit for periods before the introduction of a subsequent time limit, so credits taken beyond one year for those earlier periods are allowable. The appeal is allowed on these issues.

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Issues: (i) Whether Notification No.16/2009-CE(NT) dated 07.07.2009 is applicable retrospectively; (ii) Whether appellant is entitled to cenvat credit after 07.07.2009 on disputed items where those items were used in fabrication of supporting structures and storage tanks; (iii) Whether appellant is entitled to take cenvat credit beyond one year after receiving invoices.

Issue (i): Whether Notification No.16/2009-CE(NT) dated 07.07.2009 is applicable retrospectively.

Analysis: The notification amended Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004. Relevant High Court authorities have considered whether that amendment is clarificatory or prospective. The judgment in Vandana Global Ltd. concluded the amendment is not clarificatory and therefore operates prospectively from its commencement date.

Conclusion: Notification No.16/2009-CE(NT) dated 07.07.2009 is prospective and not retrospective; cenvat credit taken prior to 07.07.2009 is sustainable.

Issue (ii): Whether appellant is entitled to cenvat credit after 07.07.2009 on disputed items used in fabrication of supporting structures and storage tanks.

Analysis: The entitlement depends on whether the disputed inputs were used in or in relation to manufacture of excisable goods or capital goods. Production of Chartered Engineer certificates and supporting records showing use for fabrication of storage tanks, supporting structures and plant components satisfies the connection between inputs and manufacture of dutiable final products according to relevant Tribunal and court decisions cited in the order.

Conclusion: The appellant is entitled to retain cenvat credit after 07.07.2009 for disputed items demonstrably used in fabrication of supporting structures and storage tanks.

Issue (iii): Whether appellant is entitled to take cenvat credit beyond one year after receiving invoices.

Analysis: The CENVAT Credit Rules, 2004 did not impose a one year limitation for taking credit prior to the introduction of a time limit effective 01.09.2014. Consequently, availment beyond one year for periods before 01.09.2014 is not barred by the Rules in force at the relevant time.

Conclusion: The appellant is entitled to take cenvat credit beyond one year for invoices relating to the period prior to 01.09.2014.

Final Conclusion: The impugned demand, show cause notice and order are unsustainable on the decided issues and the appeal is allowed with consequential relief.

Ratio Decidendi: An amendment to the CENVAT Credit Rules that is not expressly clarificatory operates prospectively from its commencement; inputs shown to be used in fabrication of capital goods or for manufacture of excisable products qualify for cenvat credit; no statutory one year bar existed for taking cenvat credit prior to 01.09.2014.

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