2000 (10) TMI 334 - AT - Central Excise

Summary

Issues:
Quantum of Modvat credit available on goods purchased from a 100% Export Oriented Unit (EOU).

Analysis:
The case involved a dispute regarding the Modvat credit available on goods purchased from a 100% EOU. The appellants, engaged in the manufacture of organic chemicals, received inputs from an EOU, IG Petrochemicals, on payment of excise duty. The show cause notices alleged that IG Petrochemicals had not paid the appropriate duty, but the Commissioner found evidence that IG Petrochemicals had deposited the additional duty. The Department contended that the credit should be restricted to 15% of the value, while the appellants claimed credit equal to additional duty leviable on like imported goods. The Commissioner held that the credit was limited to 15% and confirmed duty demands, imposing penalties on the appellants.

The Tribunal referred to a decision of the Larger Bench in the case of M/s. Vikram Ispat and M/s. Kundalia Industries v. Commissioner of Central Excise, Mumbai. The Larger Bench held that the credit available under Notification 5/94 is not restricted to the components of additional customs duty paid by the EOU as excise duty. It clarified that the duty paid by a 100% EOU on goods cleared to any part of India is considered excise duty, eliminating the need to dissect the duty into various components. The Tribunal established the method to determine the Modvat credit available to a manufacturer from a 100% EOU, emphasizing that the credit should be equivalent to the additional duty leviable on like goods. If the duty paid by the EOU is less than the additional duty payable on like goods, the manufacturer is eligible for credit equal to the actual duty paid by the EOU. Applying the Larger Bench decision to the case at hand, the Tribunal concluded that the appellants were entitled to the credit, set aside the impugned orders, and allowed the appeals.