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TMI Blog2004 (6) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... h is a 100% EOU. The supplier was clearing the goods to the appellants under DTA sales in terms of Notification No. 2/95 by paying 50% of each of duties of Customs payable on the goods cleared and the appellants in turn availed the credit of duty corresponding to the additional duty of Customs (being restricted to 50% in terms of the said Notification). However vide their letter dated 5-1-2001 they have stated that they have taken Rs. 10,64,588/- and Rs. 23,868/- on 12-1-2001 in their Cenvat account being the differential credit to the extent of balance of 50% of CVD payable on the goods received by them from 100% EOU. It was in these circumstances that show cause No. 176/2001, dated 20-7-2001 was issued to the appellants alleging that inasmuch as the appellants are eligible to take credit on the invoices raised by an 100% EOU to the extent of the additional duties of Customs paid by the said unit under Section 3 of the Customs Tariff Act, 1975 on the goods cleared to the assessee, they are not entitled to take the differential credit and the total credit of Rs. 10,76,522/- so availed is liable to be demanded from the assessee and the show cause notice culminated in the order of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents that of Notification No. 2/95, dated 4-1-1995 provides for exemption of duty of excise in excess of 50% of each of the duties of customs leviable and accordingly the duties were paid by the supplier of the goods viz. M/s. Futura Polymers Ltd. and the appellants in turn availed the credit of duty corresponding to the additional duty of Customs being restricted to 50% in terms of the said Notification. However, subsequently the appellants have taken the differential credit to the extent of balance 50% of the CVD payable on the goods received from the 100% EOU wherein the supplier have paid only to the extent of 50% of the CVD payable. The appellants' claim is based on the fact that they are entitled to take credit of additional duty leviable on the goods in view of the Larger Bench decision in the case of Vikram Ispat v. CCE (supra). It is further stated since M/s. Futura Polymers Ltd. were availing the exemption Notification No. 2/95, dated 4-1-1995 which exempted them from so much of duty leviable in excess of 50% of each of the duties of customs and paid the duty accordingly, and inasmuch as Notification No. 21/99 C.E. (N.T.), dated 28-2-1999 restricts the credit of duty in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99, the appellants have restricted their claim to the additional duty of customs leviable under Section 3 of the Customs Tariff Act, 1975. We therefore, find force in the submissions of the learned Counsel for the appellants on the following points : (a) Aggregate of 50% of each of the duties of Customs paid by the 100% EOU as supplier of inputs is only excise duty and not duties of customs. In other words what is paid by the supplier is duty of excise and not duties of customs. (b) In terms of Sub-rule (2) of Rule 57AB, the appellants were entitled to a credit equivalent to the additional duty of Customs under Section 3 of the Customs Tariff Act, 1975 (CVD) leviable on the like goods if imported, into India, if the amount paid under Notification No. 2/95-C.E. (N.T.), dated 4-1-1995 by 100% EOU as excise duty happen to be more than the additional duty on the like goods. (c) The words "paid on such inputs" occurring in the concluding para/part of sub-rule (2) of Rule 57AB had been misinterpreted as referring to additional duty under Section 3 of the Customs Tariff Act, 1975 by the authorities below. The words refer to the duty of excise paid on the inputs. (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful reading of two notifications referred to above and Section 3 of the Central Excise Act, 1944, we find that credit of additional duty of customs has been permitted only for the purpose of bringing in equity in the case where the inputs were imported on payment of additional duty of customs. In the instant case we do not see any connection between actual payment of additional duty by a 100% E.O.U. because what is paid by a 100% EOU is Central Excise duty. If any Central Excise duty has been paid by a 100% EOU, while selling the goods in Domestic Tariff Area, customer becomes entitled to take Modvat credit and the extent of Modvat credit is determined by notification No. 177/86. So we have to read notification for measuring the quantum of credit that can be taken out of total central excise duty paid on such goods." 5.2 We further note that the Larger Bench in paras 16 and 17 of their judgment has very elaborately dealt with the identical question as to how to determine the quantum of Modvat credit available to the manufacturer in respect of the goods procured from a 100% EOU. Paras 16 17 are reproduced below for convenience of reference : "16. Notification No. 2/95-C.E., da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covering the tax cannot alter its character. Once it is held that the duty paid by the 100% E.O.U. in respect of goods cleared to any place in India is excise duty, the question of dissecting the said duty into different components of basic customs duty, auxiliary duty, additional duty of Customs or any other customs duty does not arise. The proforma of AR-IA on which the reliance was placed by the learned DR, cannot change the legal position that the duty levied on 100% E.O.U. is a duty of excise and not customs duty. 17. The question then arises is how to determine the quantum of Modvat credit available to the manufacturer in respect of the goods procured from a 100% EOU. The only method, which, we feel, is available to the Revenue is as suggested by the learned Counsel, i.e., ascertain firstly the additional duty of customs leviable on like goods, if imported into India from outside India; ascertain the actual amount of duty paid by the 100% E.O.U. on the goods cleared to any part in India under Notification No. 2/95; after ascertaining these two elements, the Modvat credit has to be allowed to the manufacturer on the basis of the first proviso to Notification No. 5/94-C.E. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the 100% EOU, then the appellants shall be eligible only for the credit equivalent to the additional customs duty leviable. The revenue wanted to restrict the credit to the additional customs duty actually paid. In fact as noted above, what is paid in the present case is only Excise duty and not the additional duty of Customs under Section 3 of the Customs Tariff Act, 1975 and what the law requires is that benefit of credit should be restricted to the additional duty leviable. This aspect of the matter has been carefully taken note of by the Larger Bench in the cited judgment wherein it is held that "The reading of the first proviso to Notification No. 5/94 does not indicate at all that the credit of specified duty shall be restricted to the components of additional customs duty actually paid by 100% EOU as excise duty". Further, the question of restricting the benefit to the additional duty paid (emphasis supplied by us) under Section 3 of the Customs Tariff Act, 1975 does not arise because there is no payment of Additional duty of Customs and what was paid was only Central Excise duty. We are, therefore, of the considered opinion that the issue is no longer res integra as ..... 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