Cenvat credit on EOU inputs follows actual duty paid where invoices lack duty breakup, not a notional fifty per cent limit.

Cenvat credit on inputs procured from a 100% Export-Oriented Unit is governed by Rule 3(6)(a) and is linked to the additional duty leviable on like imported goods under the Customs Tariff Act. Where the duty actually paid by the EOU is lower than that benchmark, credit is limited to the actual duty paid; where it is higher, credit is restricted to the additional duty leviable. On the stated facts, the invoices did not show a breakup of duty components, so the recipient was entitled to credit of the duty actually paid and was not confined to a notional 50% restriction.

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Issues: Whether, for inputs procured from a 100% Export-Oriented Unit, the Cenvat credit admissible under Rule 3(6)(a) of the Cenvat Credit Rules, 2001 is to be restricted to only half of the duty paid, or whether the actual duty paid by the supplier can be availed where no invoice breakup of duty components is available.

Analysis: The goods cleared by a 100% Export-Oriented Unit to the domestic tariff area attract duty levied under the Central Excise Act, although the quantum of duty is measured with reference to the customs duties payable on like imported goods. The duty paid by such a unit is therefore excise duty in nature, and the amount of Cenvat credit available to the recipient is governed by Rule 3(6)(a), which ties the credit to the additional duty leviable under Section 3 of the Customs Tariff Act, 1975. Where the actual duty paid by the EOU is less than the additional duty leviable, credit is limited to the actual duty paid. Where the additional duty leviable is less than the actual duty paid, credit is restricted to the additional duty leviable. On the facts, the invoices did not disclose any breakup of duty components, so the case fell within the principle that the recipient could take credit of the duty actually paid, as applied by the Larger Bench decision relied upon by the Commissioner (Appeals).

Conclusion: The credit was not required to be restricted to fifty per cent of the duty merely because the supplier was a 100% Export-Oriented Unit; the respondent was entitled to the credit as allowed by the appellate authority.

Ratio Decidendi: For clearances by a 100% Export-Oriented Unit to the domestic tariff area, the relevant credit is determined by the duty actually paid on the inputs vis-a -vis the additional duty leviable on like imported goods, and in the absence of a duty breakup in the invoice, the recipient is not confined to a notional apportionment of the supplier's duty payment.

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