2000 (9) TMI 368 - AT - Central Excise

Summary

Issues:
1. Availment of Modvat credit by appellants for inputs received from a 100% EOU.
2. Interpretation of Notification 21/99-C.E. regarding the eligibility of Modvat credit.
3. Discrepancy in the duty amount availed by the appellants and the subsequent duty demand imposed by authorities.
4. Applicability of the decision in the case of M/s. Vikram Ispat and M/s. Kundalia Industries v. Commissioner of Central Excise, Mumbai to the present case.

Issue 1: Availment of Modvat credit by appellants for inputs received from a 100% EOU.
The appellants, engaged in manufacturing PET bottles falling under Chapter Heading 39.23 of the Schedule to the CETA 1985, received inputs from a 100% EOU. They availed of the Modvat facility under Rule 57A of the Central Excise Rules for 17 consignments received during a specific period. The duty paid under the invoices was categorized into special excise duty, basic excise duty equivalent to basic customs duty, and basic excise duty equivalent to additional customs duty. The appellants initially took credit of basic excise duty equivalent to CVD and then further credit equivalent to the remaining duty amount as per the invoices.

Issue 2: Interpretation of Notification 21/99-C.E. regarding the eligibility of Modvat credit.
The authorities issued a show cause notice proposing the recovery of credit taken for special customs duty and basic excise duty equivalent to basic customs duty. The Deputy Commissioner held that the appellants were only entitled to credit equal to CVD, leading to a duty demand for excess Modvat credit availed. The Commissioner (Appeals) upheld this decision post the issuance of Notification 21/99-C.E., stating that only the central excise duty equivalent to additional duty of customs actually paid on the inputs is eligible for Modvat credit. The Commissioner allowed the appeal for credit taken before 28-2-1999, subject to verification, but rejected the appeal for credit taken after this date.

Issue 3: Discrepancy in the duty amount availed by the appellants and the subsequent duty demand imposed by authorities.
The duty demand of Rs. 11,64,016/- was confirmed by the Deputy Commissioner for excess Modvat credit availed. The Commissioner (Appeals) reduced the penalty to Rs. 2.5 lakhs and allowed the appeal for credit taken prior to 28-2-1999, pending verification of actual additional customs duty leviable on similar goods when imported under Section 3 of the Customs Tariff Act.

Issue 4: Applicability of the decision in the case of M/s. Vikram Ispat and M/s. Kundalia Industries v. Commissioner of Central Excise, Mumbai to the present case.
The Tribunal referred to the decision of the Larger Bench in the case of M/s. Vikram Ispat and M/s. Kundalia Industries, where it was held that the credit of specified duty under Notification 5/94 is not restricted to the components of additional customs duty actually paid by a 100% EOU. The Tribunal emphasized that the duty paid by a 100% EOU on goods cleared in India is excise duty, eliminating the need to segregate it into various components of customs duty. The Tribunal outlined the method for determining Modvat credit for goods procured from a 100% EOU, emphasizing the restriction of credit to the extent of duty equal to additional duty leviable on similar goods.

In conclusion, the Tribunal held that the appellants were entitled to the credit availed in March and April 1999, set aside the denial of credit taken post 28-2-1999, and allowed the appeal based on the interpretation of Notification 21/99-C.E. and the precedent set by the decision in the case of M/s. Vikram Ispat and M/s. Kundalia Industries.