CENVAT credit on EOU inputs is limited to additional duty actually payable, not the EOU's duty computation.

CENVAT credit on inputs sourced from a 100% EOU is confined to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975. Goods cleared by a 100% EOU into the Domestic Tariff Area remain subject to excise duty under Section 3(1) of the Central Excise Act, 1944, even though the duty is computed with reference to customs duties; Notification No. 2/95-C.E. affects only the extent of exemption. On a conjoint reading of the rules and notification, the relevant test is the additional duty actually payable on the inputs, not the EOU's own duty computation, and the credit allowed to the assessee was upheld.

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Issues: Whether CENVAT credit on inputs procured from a 100% Export Oriented Unit is restricted only to the additional duty leviable under Section 3 of the Customs Tariff Act, 1975, and whether the Tribunal was justified in upholding the credit allowed to the assessee.

Analysis: Goods cleared by a 100% EOU to the Domestic Tariff Area are subject to excise duty under Section 3(1) of the Central Excise Act, 1944, though the quantum is computed with reference to customs duties on like imported goods. Notification No. 2/95-C.E. exempts such clearances from excise duty only to the extent stated therein, but the nature of the levy remains excise duty. Rule 3(6)(a) of the CENVAT Credit Rules, 2001 restricts credit to the extent equal to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975 paid on such inputs. On a conjoint reading, the relevant test is the amount of additional duty actually payable on the inputs, and not the manner in which the EOU's own duty liability was computed. The Revenue failed to show any legal infirmity in the Tribunal's view.

Conclusion: The credit was rightly upheld in favour of the assessee, and no substantial question of law arose.

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