Full Judgment
Futura Polymers Ltd., Chennai, a 100% EOU during the period from 25.01.1999 to 20.04.1999. The total duty paid under the invoices was segregated into special excise duty, basic excise duty equivalent to basic customs duty, and basic excise duty equivalent to additional customs duty. After receiving the consignments, the appellants took credit of BED equivalent to CVD and subsequently they took further credit which was equivalent to balance of duty as shown in the invoice.
A show cause notice was issued proposing recovery of credit taken of special customs duty and BED equivalent to basic customs duty. The Deputy Commissioner held that the appellants were entitled to credit equal to CVD only and hence confirmed a duty demand of Rs. 11,64,016/- representing excess availment of Modvat credit. The adjudication order was upheld by the Commissioner (Appeals) who held that after the issue of Notification 21/99-C.E., dated 28.02.1999, only the amount of central excise duty equivalent to additional duty of customs actually paid on the subject inputs is eligible for Modvat credit. She allowed the appeal of the assessees in respect of credit taken prior to 28.02.1999 subject to verification of actual additional customs duty leviable on like goods when imported under Section 3 of the Customs Tariff Act, and rejected the appeal in respect of demand of credit taken from 28.02.1999 i.e. after the issue of Notification 21/99. She also reduced the penalty to Rs. 2.5 lakhs. Hence this appeal.
2. We have heard Shri J.P. Kaushik, learned Advocate and Shri Mewa Singh, learned SDR.3. We find that the issue is no longer res integra in view of the decision of the Larger Bench in the case of Vikram Ispat and Kundalia Industries v. Commissioner of Central Excise, Mumbai reported in 2000 (120) E.L.T. 800 wherein it has been held that credit of specified duty available under Notification 5/94 is not restricted to the components of additional customs duty actually paid by 100% EOU as excise duty.
The Tribunal has held that the duty paid by a 100% EOU in respect of goods cleared to any place in India is excise duty and hence the question of dissecting the said duty into different components of basic customs duty, auxiliary duty, additional duty of customs, or any other customs duty does not arise. The Tribunal has held that the method to determine the quantum of Modvat credit available to a manufacturer in respect of goods procured from 100% EOU is to first ascertain the additional duty of customs leviable on like goods, if imported into India from outside India; ascertain the actual amount of duty paid by the 100% EOU on goods cleared to any party of India under Notification 2/95; and then allow Modvat credit on the basis of the first proviso to Notification 5/94-C.E. As per the first proviso, credit shall be restricted to the extent of duty which is equal to additional duty leviable on like goods. If the additional duty is less than the actual duty paid on goods cleared from 100% EOU, the manufacturer in India shall be eligible only for the credit equivalent to additional customs duty. On the other hand, if duty actually paid by the 100% EOU on inputs cleared by them is less than the additional duty of customs payable on like goods, then the manufacturer shall be eligible only to the extent of actual duty paid by 100% EOU.4. The relevant Notification in this case is 21/99. We perused the same and find that the learned Counsel is correct in his submission that the relevant clause is identical to Notification 5/94-C.E. which was the predecessor Notification inasmuch as both Notifications stipulate that credit of specified duty in respect of any input produced or manufactured by a 100% EOU shall be restricted to the extent which is equal to additional duty leviable on like goods, under Section 3 of the Customs Tariff Act, 1975 paid on such inputs. Therefore, the ratio of the Larger Bench decision is squarely applicable to the facts of this case and following the ratio thereof, we hold that the appellants are entitled to credit of Rs. 9,13,340/- availed in March and April, 99, set aside the denial of credit taken from 28.02.1999, and allow the appeal.