Modvat credit on exempt imported goods was denied because no additional duty equivalent to excise had been paid.

Modvat credit was unavailable on imported mica paper cleared without payment of additional duty of excise under the applicable exemption notification. Credit could be taken only where the duty equivalent to excise had actually been paid on the imported goods, and the absence of such duty collection made the claim unsustainable. The disallowance of credit was therefore justified.

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Issues: Whether Modvat credit was admissible on imported goods on which additional duty was exempted under the relevant notification.

Analysis: The imported mica paper had been cleared without payment of additional duty of excise because it was exempted under the notification issued with reference to Section 3 of the Customs Tariff Act, 1975. Modvat credit could be taken only where the additional duty equivalent to excise duty had actually been paid. Since no such duty was collected on the imported goods, the credit claim was not sustainable.

Conclusion: Modvat credit was not admissible, and the disallowance was justified.

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