Judgment:
1. In this case, modvat credit of Rs.2,41,527/- has been disallowed and its recovery ordered under Rule 57-I of the Central Excise Rules, to the appellants who are manufacturers of 100% cotton yarn, on cotton waste received from 100% EOU, on the ground that the cotton waste was chargeable to nil rate of duty leviable under Section 3 of the Customs Tariff Act, 1975 during the relevant period viz. April to July 1995 and hence modvat credit was not available as per the first proviso to Notification 5/94-CE dated 1.3.94.
2. We have heard Shri Gagan Kohli, learned Advocate and Shri R.C.Shukla, learned JDR.3. In terms of proviso to Notification 5/94, credit of specified duty in respect of any inputs produced or manufactured; (a) ........... (b) by 100% Export Oriented Undertaking or .......... and used in the manufacture of final products in any place in India shall be restricted to the extent of duty which is equal to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975....... paid on such inputs. In the present case, additional duty leviable has not been paid. Hence no modvat credit is admissible. This view is supported by the recent decision of the Apex Court in the case of Collector of Customs vs. Presto Industries reported in 2001 (128) ELT 321 wherein the Supreme Court has held that the additional duty is in addition to customs duty leviable under the Customs Act, and not a countervailing duty and since the additional duties of customs were not paid on waste and scrap of imported cellulose accetate sheets under Section 3(1) of the Customs Tariff Act 1975, benefit of exemption under Notification 16/83-CE dated 11.2.83 is not available since the condition of the Notification has not been fulfilled.
4. Following the ratio of the Supreme Court judgment cited supra, we uphold the impugned order and reject the appeal.