Cenvat credit on 100% EOU inputs limited to customs duty element, with precedent and notice-based limits upheld.

Credit on inputs procured from a 100% EOU was analysed under the applicable Cenvat/Modvat notification, with the discussion focusing on whether admissible credit was confined to the additional duty of customs payable on like imported goods. The order treated the notification as materially similar to the one considered by the Larger Bench, relied on departmental circulars and prior Tribunal rulings in the assessee's own case, and noted that new grounds could not be raised at the appeal stage if absent from the show cause notice. It also stated that subordinate authorities were bound by appellate and Tribunal precedent. On that basis, the drop-order was upheld and the departmental appeal rejected.

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Issues: Whether credit taken on inputs procured from a 100% EOU was restricted to the additional customs duty element and whether the order dropping the demand was legally sustainable.

Analysis: The dispute turned on the interpretation of the notifications governing credit on inputs supplied by a 100% EOU and the scope of the credit available under the Cenvat/Modvat scheme. The order relied on the Larger Bench view that credit is confined to the additional duty of customs leviable on like imported goods under Section 3 of the Customs Tariff Act, 1975, and noted that the relevant notification was materially similar to the earlier notification considered by the Larger Bench. The order also relied on departmental circulars and prior Tribunal decisions in the assessee's own case. It further held that new grounds could not be introduced at the appeal stage if they were not part of the show cause notice, and that departmental officers were bound by appellate and Tribunal decisions.

Conclusion: The credit taken by the assessee was held to be in accordance with the applicable notification and the drop-order was upheld; the departmental appeal was rejected.

Ratio Decidendi: Where the notification governing credit on inputs from a 100% EOU limits admissible credit to the additional duty of customs leviable on like imported goods, credit beyond that limit is not available, and subordinate authorities must follow binding appellate precedent on the same issue.

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