2008 (7) TMI 675 - AT - Central Excise

Summary

Issues:
The issues involved in the judgment are the eligibility of Cenvat credit u/s Rule 3(6)(a) of Cenvat Credit Rules, 2001 when goods are procured from a 100% Export-Oriented Unit and the interpretation of duty paid by the supplier in relation to the credit available.

Eligibility of Cenvat Credit:
The case involved the availing of Cenvat credit by the respondents based on invoices issued by a 100% export-oriented unit, leading to a dispute regarding the amount of credit claimed. The Department contended that the respondents were only eligible to take credit equal to half of the actual additional duty paid by the supplier of the inputs. A show cause notice was issued, resulting in the demand for recovery of excess credit and imposition of a penalty. The Commissioner (Appeals) allowed the appeal filed by the respondents, leading to the Revenue filing this appeal.

Interpretation of Duty Paid:
The dispute centered around the interpretation of duty paid by the supplier of imports, who had paid duty by availing the benefit of Notification No. 2/95-C.E. dated 4 January 1995. The Revenue argued that only 50% of the additional duty could be taken as credit due to the supplier's liability to pay 50% of the total customs duty payable. The Commissioner (Appeals) applied the decision of the Larger Bench of the Tribunal, emphasizing the lack of breakup of different components of duties in the disputed invoices. The Tribunal held that the supplier had paid excise duty, not just 50% of the additional duty, making the respondents eligible for Cenvat credit equal to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975.

Conclusion:
The Tribunal rejected the appeal, upholding the decision of the Commissioner (Appeals) based on the interpretation of the duty paid by the supplier and the eligibility of the respondents for Cenvat credit as per Rule 3(6)(a) of the Cenvat Credit Rules, 2001. The judgment emphasized the nature of the duty paid by the supplier and the criteria for determining the quantum of Modvat credit available in cases where goods are procured from a 100% Export-Oriented Unit.