Retrospective Modvat credit restriction rejected where entitlement had already accrued before the amendment took effect.

A six-month limitation inserted into Rule 57G of the Central Excise Rules, 1944 was held not to operate retrospectively against Modvat credit that had already crystallised when inputs were received with valid duty-paid documents before the amendment. The amendment was not treated as declaratory or clarificatory, and no express or implied retrospective effect was found. A vested statutory credit right could not be withdrawn by later amendment without clear language. The restriction therefore applied only to credits accruing after commencement, and denial of credit, recovery of duty, and penalty were not sustainable.

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Issues: Whether the six-month time limit inserted in Rule 57G of the Central Excise Rules, 1944 by Notification No. 28/95 dated 29-6-1995 applied retrospectively to Modvat credit that had accrued on receipt of inputs before the amendment, and whether denial of credit and consequential recovery and penalty were justified.

Analysis: The inputs had been received with valid duty-paid documents before the amendment and the entitlement to Modvat credit had crystallised on that date. The amendment introducing the six-month restriction was not held to be declaratory or clarificatory, and there was nothing in the text to show express or implied retrospective operation. A pre-existing statutory right, once accrued, could not be taken away by a later amendment unless the amendment clearly so provided. The time limit introduced by the amendment was therefore confined to credits accruing after its commencement.

Conclusion: The amended Rule 57G did not retrospectively bar the assessee's accrued Modvat credit, and the denial of credit, recovery of duty, and penalty were not sustainable; the appeal was allowed with consequential relief.

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