MODVAT credit on inputs cleared to a 100% EOU under CT-3 certificate required Larger Bench consideration amid conflicting rulings.

Removal of inputs as such by a manufacturer to a 100% export-oriented unit under CT-3 certificate raised the question whether MODVAT credit had to be reversed or duty paid under Notification No. 1/95-C.E. The order considered the interaction of Rule 57F of the Central Excise Rules, 1944 with the notification and noted that the Board's circular on export under bond could not be automatically applied to such removals. Because co-ordinate bench rulings conflicted on the same issue, the matter was treated as requiring examination by a Larger Bench rather than final decision on the merits.

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Issues: Whether inputs procured by a manufacturer and cleared as such to a 100% export-oriented unit under CT-3 certificate could be removed without reversal of MODVAT credit or payment of duty under Notification No. 1/95-C.E. dated 4-1-1995; and whether the conflict between co-ordinate bench decisions justified reference to a Larger Bench.

Analysis: The order noted competing views on the effect of Rule 57F of the Central Excise Rules, 1944 and the scope of Notification No. 1/95-C.E. It also considered the Board's circular on export under bond, but observed that its reasoning could not automatically be extended to removals of inputs as such to a 100% EOU. In view of the conflicting tribunal rulings on the same question, the matter was found fit for consideration by a Larger Bench.

Outcome: No final adjudication on the merits was rendered and the records were directed to be placed before the Hon'ble President for constitution of a Larger Bench.

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