2000 (8) TMI 111 - AT - Central Excise

Duty Clarification for Exporters: Excise vs. Customs

The Tribunal held that the duty paid by 100% Export Oriented Undertakings (E.O.U.s) on goods cleared to the Domestic Tariff Area (D.T.A.) is excise duty, ... Modvat - Excise duty - Words and Phrases Issues Involved:1. Quantum of Modvat credit of the duty paid on inputs available to manufacturers under Rule 57A of the Central Excise Rules read with Notification No. 5/94-C.E.2. Interpretation of the proviso to Notification No. 5/94-C.E. (N.T.) regarding credit restrictions for goods received from 100% Export Oriented Undertakings (E.O.U.).Summary:1. Quantum of Modvat Credit:- M/s. Vikram Ispat and M/s. Kundalia Industries manufacture H.P. sponge iron and avail of Modvat credit u/s 57A of the Central Excise Rules. They procure Iron Ore Pellets from various sources, including 100% E.O.U.s.- Notification No. 2/95-C.E. establishes the duty payable by 100% E.O.U.s when clearing goods to the Domestic Tariff Area (D.T.A.), which is 50% of each of the duties of Customs leviable u/s 12 of the Customs Act, with a proviso that the duty shall not be less than the excise duty on like goods manufactured in DTA.- The Department argues that Modvat credit should be limited to the additional duty of customs component, while the appellants contend that the entire duty paid by 100% E.O.U.s should be considered as excise duty for Modvat credit purposes.2. Interpretation of Proviso to Notification No. 5/94-C.E. (N.T.):- The proviso to Notification No. 5/94-C.E. (N.T.) restricts the Modvat credit to the extent of duty equal to the additional duty leviable on like goods u/s 3 of the Customs Tariff Act, paid on such inputs.- The Tribunal in the First Weston case held that no Modvat credit is available if additional duty was exempted, while in the Second Weston case, it was held that the credit should be determined by presuming the additional duty component in the total excise duty paid by 100% E.O.U.- The Larger Bench agreed with the Second Weston case, stating that the duty paid by 100% E.O.U.s is central excise duty, and the measure of duty is customs duty. The method of determining the measure does not change the nature of the duty.Conclusion:- The Tribunal concluded that the duty paid by 100% E.O.U.s on goods cleared to DTA is excise duty, not customs duty. The Modvat credit should be restricted to the additional duty leviable on like goods if imported into India, and not dissected into components of customs duty.- The Tribunal emphasized that the credit should be based on the actual duty paid by 100% E.O.U.s and the additional duty leviable on like goods, ensuring that the credit does not exceed the additional duty component.