2006 (4) TMI 324 - AT - Central Excise

Summary

Issues:
1. Entitlement to Modvat credit for duty paid on goods cleared from EOU to DTA.
2. Interpretation of Notification 2/95 and Notification 5/94 regarding Modvat credit eligibility.
3. Applicability of customs duty versus excise duty on goods cleared to DTA.
4. Request for reference to Larger Bench based on previous judicial decisions.

Analysis:
1. The appeal addressed the entitlement of Modvat credit for duty paid on goods cleared from EOU to DTA. The appellants received Mica Paper and claimed a Modvat credit of Rs. 1,20,000. The Commissioner of Central Excise (Appeals) denied the credit, stating that the appellants were not eligible. The issue revolved around the restriction imposed by Notification No. 5/94, which limits the credit to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975. The Tribunal upheld the denial of credit based on this restriction, emphasizing that the credit is limited to the customs duty aspect, not excise duty.

2. The interpretation of Notification 2/95 and Notification 5/94 played a crucial role in determining the Modvat credit eligibility. The appellants argued that Notification 2/95 provided an exemption for goods sold in DTA, but the Tribunal focused on the restriction outlined in Notification 5/94. The Tribunal highlighted that the credit was restricted to the additional duty of customs leviable under Section 3 of the Customs Tariff Act, 1975. This interpretation guided the decision to reject the appeal and uphold the denial of Modvat credit.

3. The distinction between customs duty and excise duty on goods cleared to DTA was a key aspect of the case. While the nature of duty paid was acknowledged as excise duty, the Tribunal emphasized that the credit eligibility was tied to the additional duty of customs under the Customs Tariff Act. The Tribunal clarified that the restriction on credit was based on the customs duty aspect, leading to the rejection of the appeal. The judgment underscored the importance of understanding the specific duty components involved in Modvat credit claims.

4. The appellants sought a reference to the Larger Bench based on previous judicial decisions, including the case of CCE v. M/s Perry Polymers (Pvt) Ltd. The Tribunal considered these references but ultimately found no merit in the appellant's contentions. The decision to reject the appeal and uphold the Order-in-Appeal was based on the clear restriction outlined in Notification 5/94 regarding the Modvat credit eligibility criteria. The judgment emphasized adherence to the specific provisions and notifications governing Modvat credit claims, ultimately leading to the dismissal of the appeal.