2004 (6) TMI 206 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for Cenvat Credit on inputs received from a 100% EOU.
2. Interpretation of statutory provisions and notifications regarding the extent of credit allowable.
3. Applicability of the Larger Bench judgment in Vikram Ispat v. CCE.
4. Correctness of the lower authorities' orders.

Issue-wise Detailed Analysis:

1. Eligibility for Cenvat Credit on inputs received from a 100% EOU:

The appellants, engaged in the manufacture of mineral waters under the brand name "Bisleri," availed Cenvat Credit on inputs and capital goods, including "preform and polyester chips" received from a 100% EOU, M/s. Futura Polymers Ltd. The supplier cleared these goods under DTA sales in terms of Notification No. 2/95, paying 50% of each of the duties of Customs. The appellants initially took credit corresponding to this 50% but later claimed the differential credit for the remaining 50%.

2. Interpretation of statutory provisions and notifications regarding the extent of credit allowable:

The dispute arose from the interpretation of sub-rule (2) of Rule 57AB of the CE Rules, 1944, and Notification No. 21/99 C.E. (N.T.), dated 28-2-1999. The Revenue argued that the appellants were only entitled to the actual duty paid by the 100% EOU, not the additional duty leviable. The appellants contended that they were entitled to the credit equivalent to the additional duty of Customs under Section 3 of the Customs Tariff Act, 1975, as per the Larger Bench decision in Vikram Ispat v. CCE.

3. Applicability of the Larger Bench judgment in Vikram Ispat v. CCE:

The appellants heavily relied on the Larger Bench judgment in Vikram Ispat v. CCE, which clarified that the duty paid by a 100% EOU is Central Excise duty, and the credit should be equivalent to the additional duty of Customs leviable on like goods if imported into India. The Tribunal agreed with this interpretation, noting that the duty paid by the 100% EOU is excise duty and not customs duty, and the measure of tax should not alter its character.

4. Correctness of the lower authorities' orders:

The Tribunal found that the lower authorities misinterpreted the statutory provisions by restricting the credit to the additional duty of Customs actually paid, rather than the additional duty leviable. The Tribunal emphasized that the credit should be equivalent to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975, as per the Larger Bench judgment. 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 the Cenvat Credit equivalent to the additional duty of Customs leviable on like goods under Section 3 of the Customs Tariff Act, 1975, and not merely the actual duty paid by the 100% EOU. The impugned order was set aside, and the appeal was allowed with consequential relief.