Modvat credit on inputs from a 100% export oriented unit upheld where duty matched additional customs duty

Credit on inputs received from a 100% export oriented unit was examined under the Modvat scheme, with the dispute turning on whether the duty element represented additional duty of customs and whether the relevant rule and notification limited credit to the duty actually paid. The Madras HC accepted the Tribunal's and Larger Bench's view that credit remained admissible where the duty corresponded to the additional duty of customs leviable under the Customs Tariff Act, 1975. The credit claim was upheld and the Revenue's challenge failed.

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Issues: Whether credit of duty was admissible on inputs cleared by a 100% export oriented unit where the duty element corresponded to additional duty of customs, and whether the restriction under the relevant rules and notification barred credit beyond the duty actually paid.

Analysis: The appeals turned on the entitlement to Modvat credit in respect of goods received from a 100% EOU. The Court accepted the view taken by the Tribunal and the Larger Bench decision relied upon by it, and found no reason to take a different view. The dispute was resolved in the context of the notification governing the concessional duty structure and the rule restricting credit to the duty equivalent of the additional duty of customs leviable under the Customs Tariff Act, 1975.

Conclusion: The credit claim was upheld and the Revenue's challenge failed.

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