2010 (3) TMI 643 - AT - Central Excise

Extent of Cenvat credit available when input procured from 100% EOU - The supplying unit paid confessional rate of duty in terms of Notification No. 2/95 - 50% of each of the duties of Customs -The appellant took credit of the entire amount of CVD payable and not 50% of the amount actually paid Held that - entire duty paid by the 100% EOU should be treated as one amount and the same should be compared to the additional duty of customs payable if like goods were to be imported - whichever is less shall be available as modvat credit.

Summary

Issues:
1. Extent of credit available to the appellant in respect of inputs received from a 100% EOU.

Analysis:
The appeal was against the order of the Commissioner (Appeals) regarding the credit available to the appellant for inputs procured from a 100% EOU. The supplying unit had paid a confessional rate of duty, and the appellant took credit of the entire amount of CVD payable instead of 50% as per the notification. The original authority restricted the credit to the CVD component actually paid and imposed penalties. The appellant cited a Larger Bench decision in the case of Vikram Ispat to support their claim of taking credit as per the method prescribed in that decision. The SDR reiterated the findings of the Commissioner (Appeals).

The Tribunal considered the submissions from both sides. The original authority and the Commissioner (Appeals) held that the credit should be restricted to the duty paid on the inputs by the supplying unit or the actual duty paid by the 100% EOU, whichever is less. However, the Larger Bench in the case of Vikram Ispat held that clearances by 100% EOU are not imports under the Customs Act, and the duty paid is only excise duty. The Tribunal prescribed a method to determine the quantum of Modvat credit, which involves comparing the additional duty of customs leviable on like goods if imported with the actual duty paid by the 100% EOU. The credit should be restricted to the lesser amount between these two.

Therefore, the Larger Bench's decision clarified that the entire duty paid by the 100% EOU should be considered as one amount, and the credit available to the recipient unit should be the lesser of this amount and the additional duty of customs payable if like goods were imported. As the duty paid by the 100% EOU was higher than the additional customs duty leviable on like goods imported, the appellant was entitled to the full credit. Consequently, the Tribunal set aside the orders of the lower authorities and allowed the appeal with consequential relief.