2004 (6) TMI 622 - AT - Central Excise

Summary

Issues Involved:
1. Admissibility of Modvat Credit.
2. Interpretation of Notification No. 2/95-CE dated 4.1.95.
3. Restriction of credit to the Additional Duty of Customs actually paid versus leviable.
4. Application of Larger Bench judgment in Vikram Ispat Vs. CCE Mumbai.

Issue-wise Detailed Analysis:

1. Admissibility of Modvat Credit:
The appellants, engaged in manufacturing automotive lighting equipment, availed CENVAT Credit/Modvat Credit on inputs (Phoenix brand bulbs) supplied by M/s. Maruti Udyog Ltd. (M/s. MUL). These inputs were initially cleared by M/s. Phoenix Lamps India Ltd., a 100% EOU, under the DTA clearance procedure as per Notification No. 2/95-CE dated 4.1.95. The appellants took credit of the full duty amount shown in M/s. MUL's invoice, which included all customs duties paid by M/s. Phoenix. The department issued a show cause notice proposing to disallow the wrongly availed credit of Rs. 12,86,915/- and imposing a penalty, culminating in the order of adjudication by the original authority. The original authority held that the appellants were eligible for credit equal to the Additional Duty of Customs paid, not the Additional Duty of Customs leviable.

2. Interpretation of Notification No. 2/95-CE dated 4.1.95:
The appellants argued that they were entitled to take the entire credit as passed on by M/s. MUL, even if the goods were supplied by a 100% EOU under Notification No. 2/95-CE. They relied on the Larger Bench judgment in Vikram Ispat Vs. CCE Mumbai, which supported their claim. The department, however, maintained that the credit should be restricted to the Additional Duty of Customs actually paid, as per Notification No. 5/94-CE (NT) dated 1.3.94, superseded by Notification No. 21/99-CE (NT) dated 28.2.99.

3. Restriction of credit to the Additional Duty of Customs actually paid versus leviable:
The Tribunal observed that the appellants initially took full credit of the duty shown as Basic Excise duty in M/s. MUL's invoice but later reversed the excess credit, restricting it to the amount equal to the additional duty of Customs leviable. The Tribunal referred to the Larger Bench judgment in Vikram Ispat Vs. CCE Mumbai, which clarified that the credit should be restricted to the additional duty leviable, not the additional duty actually paid. The judgment emphasized that the duty paid by a 100% EOU is Central Excise duty, not additional duty of Customs, and the credit should be determined based on the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975.

4. Application of Larger Bench judgment in Vikram Ispat Vs. CCE Mumbai:
The Tribunal noted that the Larger Bench judgment in Vikram Ispat Vs. CCE Mumbai directly applied to the present case. The judgment stated that the credit of specified duty should be restricted to the extent of the additional duty leviable on like goods, not the components of additional customs duty actually paid. The Tribunal highlighted that the duty paid by a 100% EOU is Central Excise duty, and the benefit should be restricted to the additional duty leviable. The Tribunal followed the Larger Bench judgment and other similar decisions by the North Regional Bench, concluding that the impugned order was not legal and proper. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.

Conclusion:
The Tribunal concluded that the appellants were entitled to take Modvat Credit to the extent of the additional duty of Customs leviable on the goods, as per the Larger Bench judgment in Vikram Ispat Vs. CCE Mumbai. The impugned order was set aside, and the appeal was allowed with consequential relief.