Modvat credit on inputs cleared to a 100% EOU need not be reversed when cleared under CT-3 certificates.

Inputs cleared as such to a 100% export oriented undertaking against CT-3 certificates were treated as eligible for exemption without reversal of Modvat credit. The Tribunal followed the jurisdictional High Court's remand and the Karnataka High Court's view in Solectron Centum Electronics Ltd., applying judicial discipline to hold that credit on such inputs was not required to be reversed merely because the goods were cleared to an EOU. The result was that the assessee could avail Modvat credit and clear the inputs to the 100% EOU without payment of duty or reversal of credit.

---

---

Issues: Whether inputs cleared as such to a 100% EOU under CT-3 were eligible for exemption and whether the Modvat credit availed on such inputs was required to be reversed.

Analysis: The dispute concerned inputs received by the manufacturer and cleared as such to a 100% export oriented undertaking against CT-3 certificates. The Tribunal noted that the matter had earlier been decided by a Larger Bench against the assessee, but the jurisdictional High Court, while remanding the matter, relied on the Karnataka High Court decision in Solectron Centum Electronics Ltd. In that decision, the credit taken on inputs cleared to an EOU was held reversible only where the credit had been taken and later reversed under protest, and the question was answered in favour of the assessee. Following that binding course and judicial discipline, the Tribunal accepted that the clearance to a 100% EOU did not require reversal of the input credit.

Conclusion: The assessee was entitled to avail Modvat credit on the inputs and to clear them without payment of duty to the 100% EOU without reversing the credit.

---