Modvat/CENVAT credit on inputs from a 100% EOU remains capped by the additional customs duty ceiling.

Credit on inputs received from a 100% Export-Oriented Undertaking was governed by the notification limits under Rule 57A, and entitlement remained capped at the additional duty leviable on like imported goods under Section 3 of the Customs Tariff Act. The duty paid by the EOU on clearances into the Domestic Tariff Area was relevant to the measure of credit, but it did not remove the ceiling imposed by the notification. The later 1999 notification was held not to materially alter this position, so the earlier Larger Bench ratio continued to apply. On the facts found, the credit taken did not exceed the permissible limit, and the assessee's entitlement was upheld.

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Issues: Whether the assessee was entitled to Modvat/CENVAT credit on inputs received from a 100% Export-Oriented Undertaking under the relevant notifications, and whether the later notification differed materially so as to displace the ratio governing the earlier notification.

Analysis: The admissible credit was governed by the notifications issued under Rule 57A of the Central Excise Rules, 1944, under which credit on inputs from a 100% EOU was restricted to the extent of duty equal to the additional duty leviable on like imported goods under Section 3 of the Customs Tariff Act, 1975. The Tribunal held that the excise duty paid by the 100% EOU on clearances into the Domestic Tariff Area represented the measure for credit, but the entitlement remained capped by the additional customs duty on like goods. It further held that the later notification of 1999 did not materially alter this position, and that the principle earlier laid down in the Larger Bench decision remained applicable. On the facts found by the adjudicating authority, the credit availed was not in excess of the permissible ceiling.

Conclusion: The assessee's credit entitlement was correctly allowed and the Revenue's challenge failed.

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