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TMI Blog2010 (3) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... had availed the CENVAT credit of the duty paid on the inputs under the CENVAT Credit Rules, 2001 (the Rules). The Central Excise Audit Party, during the course of scrutiny of the records of the respondent, noticed that during the period from 1-7-2001 to 10-2-2002, respondent had availed CENVAT credit on the basis of invoices issued by a 100% Export Oriented Unit (EOU) viz. M/s. Elque Polyester Ltd., Falta EPZ, West Bengal. The said 100% EOU had availed the benefit of Notification No. 2/95-C.E., dated 4th January 1995 and had paid 50% of the total duty payable, whereas the respondent had availed of CENVAT credit equivalent to the basic excise duty shown in the input invoices which according to the revenue was not admissible. According to the revenue in view of the provisions of clause (a) of sub-rule (6) of Rule 3 of the Rules since the supplier of the inputs had paid 50% of the additional duty (i.e. basic excise duty) on the goods cleared to the respondent, the respondent was eligible to take CENVAT credit equal to the actual additional duty paid by the supplier of the inputs i.e., 100% E.O.U. Therefore, CENVAT credit of Rs. 1,46,511/- wrongly availed by the respondent was require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is observed that the measure of collection of duty does not change the nature of duty. Hence, what has been paid by the supplier is duty of excise and not duties of custom (basic customs duty, additional duty etc.) and as such, the adjudicating authority had erred in holding that the supplier unit has paid 50% of the additional duty. Commissioner (Appeals) has further found that under Rule 3(6)(a) of the Rules, as they stood at the relevant time, the respondent was eligible to avail of CENVAT credit equal to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975, paid on such inputs. Commissioner (Appeals) was of the view that on a plain reading of the said provision, credit was required to be restricted to the extent of duty which was equal to the additional duty leviable on like goods. If the additional duty leviable was less than the actual duty paid on the inputs cleared from a 100% EOU, the manufacturer in India would be eligible only for the credit equivalent to the additional customs duty leviable. On the other hand, if the duty actually paid by a 100% EOU on inputs cleared by them was less than availed duty of customs payable on like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O.U. However, if the aggregate of duty of customs leviable on goods cleared by 100% E.O.U. is more than the duty of excise leviable on like goods, a 100% E.O.U. has to pay more duty. The Revenue want to restrict the availment of Modvat credit to the components of additional duty of customs paid under Section 3 of the Customs Tariff Act, by bringing the fiction that 100% E.O.U. is a place which is not in India and the sale therefrom within India is akin to import into India. We do not find any substance in this view of the Revenue. The clearance of the goods by 100% E.O.U. are not import in the terms in which it has been defined under Section 2(23) of the Customs Act, according to which, import, with its grammatical and cognate expression means bringing into India from a place outside India. This is also apparent from the fact that when the goods are cleared from 100% E.O.U. to any other place in India, central excise duty under Section 3(1) of the Central Excise Act is levied and not the customs duty under the Customs Act. If it is to be regarded as import, then the duty has to be charged under section 12 of the Customs Act, read with Section 3 of the Customs Tariff Act. The Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been the intention of the Government, the proviso would not have been termed in the present form. In that situation the proviso should have provided that the credit of specified duty shall be restricted to the extent of portion of excise duty which is equivalent to the additional duty of customs paid by the 100% E.O.U. The phrase equivalent to the duties of excise specified under (i) and (ii) above paid on such inputs refers to the payment of (a) duty of excise under the Central Excise Act and (b) additional duty of excise under the Additional Duties of Excise (Textile and Textile Articles) Act. If the Additional Customs duty leviable on like goods includes any other excise duty, such as duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Modvat Credit will not be available in respect of such duty. 7. The facts are not in dispute. The respondent had availed of CENVAT credit on the basis of invoices issued by 100% E.O.U. The 100% E.O.U. had availed of the benefit of Notification No. 2/95 dated 4-1-1995. Under Notification No. 2/95 a 100% E.O.U. was exempted from so much of duty of excise as was in excess of the amount calculated at the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , - (i). xxxxxx (ii) by a hundred per cent, export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or Software Technological Park and used in manufacture of the final products in any part of India, shall be restricted to the extent which is equal to the additional duty leviable on like goods under section 3 of the Customs Tariff Act, 1975 paid on such inputs or capital goods; 9. Thus, sub-rule (6) carves out an exception to sub-rule (1) of Rule 3, inasmuch as the same restricts the entitlement to CENVAT credit in respect of inputs or capital goods produced or manufacture by a 100% EOU to the extent which is equal to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975 (hereinafter referred to as the Tariff Act) paid on such inputs or capital goods. 10. Thus the Notification No. 2/95 exempts 100% E.O.U.s from payment of excise duty to the extent stated thereunder. The excise duty is to be calculated at the rate of 50% of each of the duty of customs leviable on the like goods produced or manufactured outside India. Thus, what is actually paid is excise duty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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