Modvat credit on 100% EOU inputs denied where additional customs duty on like imported goods was nil.

Modvat credit on mica paper procured from a 100% Export Oriented Undertaking was confined to the extent of additional duty of customs leviable on like imported goods. Because the applicable exemption notifications made the additional duty on imported mica paper nil, the credit limit under the Rule 57A notification was also nil. The fact that the EOU had discharged duty by reference to the aggregate customs duties under the Customs Act did not enlarge the credit entitlement. No Modvat credit was admissible where the corresponding additional duty on like imported goods was nil.

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Issues: Whether Modvat credit was admissible on mica paper procured from a 100% Export Oriented Undertaking when the additional duty of customs leviable on like imported goods was nil.

Analysis: Credit under the relevant notification issued under Rule 57A was confined to the extent of duty equal to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975. The inputs were cleared by the 100% EOU on payment of duty computed with reference to the aggregate customs duties contemplated under Section 12 of the Customs Act, 1962, but the additional duty leviable on mica paper imported into India was nil because of the applicable exemption notifications. The governing principle applied was that credit could not exceed the additional duty leviable on like imported goods, and where that duty was nil, no Modvat credit was admissible.

Conclusion: Modvat credit was not admissible to the respondent, and the Revenue's objection was .

Ratio Decidendi: Where credit on inputs from a 100% EOU is restricted to the extent of additional duty leviable on like imported goods, no credit is available if such additional duty is nil.

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