Special excise duty excluded from MODVAT credit scheme, so higher notional credit was denied under the exemption notifications.

Special excise duty was held not to fall within the duty structure covered by the relevant exemption and credit notifications because it is sourced from the Finance Act and is outside the scheme of duty referred to in Section 3 of the Central Excises & Salt Act, 1944 and Rule 8(1) of the Central Excise Rules, 1944. On that basis, higher notional MODVAT credit was not available under Notification No. 175/86, as amended by Notification No. 136/88, and the claim was rejected.

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Issues: Whether the appellant was entitled to higher notional credit under MODVAT in respect of special excise duty.

Analysis: The appeal turned on whether special excise duty could be treated as part of the duty contemplated by the relevant exemption and credit notifications. The Tribunal followed its earlier ruling on the same issue and held that special excise duty is sourced from the Finance Act and is not included within the scheme of duty referred to in Section 3 of the Central Excises & Salt Act, 1944 or within the notification framework under Rule 8(1) of the Central Excise Rules, 1944. On that basis, higher notional credit was not available for special excise duty under Notification No. 175/86 as amended by Notification No. 136/88 dated 1-4-1988.

Conclusion: The appellant was not entitled to higher notional MODVAT credit on special excise duty and the issue was decided against the assessee.

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