2005 (7) TMI 494 - AT - Central Excise

Summary

Issues:
1. Modvat credit eligibility for duty paid by 100% E.O.U.
2. Interpretation of Notification No. 177/86 regarding Modvat credit restriction.
3. Application of Vikram Ispat case in determining Modvat credit.
4. Discrepancy between excise duty and customs duty on goods cleared from E.O.U.

Modvat Credit Eligibility:
The case involved a dispute over Modvat credit eligibility for duty paid by a 100% E.O.U. The respondent claimed Modvat credit for duty paid by M/s. Mica Trading Corporation Ltd., but a show cause notice challenged this claim. The Additional Commissioner allowed partial credit, leading to an appeal by the Revenue. The Commissioner (Appeals) upheld the credit, prompting the Revenue to appeal to the Tribunal, which allowed the appeal based on the Vikram Ispat case. The ROM application sought a review, arguing that the entire credit should be allowed as the duty on goods from E.O.U. is excise, not customs duty.

Interpretation of Notification No. 177/86:
The core issue revolved around the interpretation of Notification No. 177/86, which restricts Modvat credit to the additional duty of customs leviable. The Tribunal analyzed the provisions of the notification and upheld the restriction, emphasizing that the Modvat credit available is dependent on the additional duty of customs leviable. The decision highlighted that the additional duty of customs leviable on Mica paper being Nil under the relevant notifications resulted in a Nil Modvat credit availability.

Application of Vikram Ispat Case:
The Tribunal referenced the Vikram Ispat case to determine Modvat credit availability, emphasizing that the decision in Vikram Ispat did not overlook the provisions of Notification No. 177/86. It clarified that the Modvat credit is limited to the additional duty of customs leviable on similar goods. The Tribunal rejected the argument that the entire duty paid on goods cleared from E.O.U. should be available for Modvat credit, citing the specific provisions of the notification.

Discrepancy Between Excise Duty and Customs Duty:
The judgment addressed the discrepancy between excise duty and customs duty on goods cleared from E.O.U. The Tribunal reiterated that the duty paid on such goods is excise duty, but the Modvat credit availability is restricted by the provisions of Notification No. 177/86, which tie the credit to the additional duty of customs leviable. The decision emphasized that none of the cited cases supported ignoring the notification or claiming full credit for duty paid by a 100% E.O.U., ultimately rejecting the ROM application.

In conclusion, the Tribunal upheld the restriction on Modvat credit as per Notification No. 177/86, emphasizing the link between credit availability and the additional duty of customs leviable. The judgment clarified the nature of duty on goods from E.O.U. as excise, but highlighted the specific provisions governing Modvat credit eligibility, resulting in the rejection of the ROM application.