Modvat credit restriction could not be extended by implication to additional duty of customs on imported paper.

A Modvat credit restriction in Notification No. 177/86-C.E. was treated as inapplicable to additional duty of customs paid on imported paper used in the manufacture of electric wires and cables, because the proviso capping credit for paper and paper board did not expressly include that duty. The omission was treated as deliberate, and the additional duty under section 3 of the Customs Tariff Act, 1975 was not to be read as covered by the stated limitation. The assessee was therefore entitled to credit on that duty, and the lower orders were set aside.

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Issues: Whether the restriction in Notification No. 177/86-C.E. on Modvat credit to Rs. 800 per metric tonne applied to credit taken on additional duty of customs paid on imported paper used in the manufacture of electric wires and cables.

Analysis: The notification defined "specified duty" for certain purposes, but in the relevant proviso dealing with paper and paper board the additional duty of customs was not expressly included among the duties whose credit was to be capped. The omission was treated as deliberate. The additional duty leviable under Section 3 of the Customs Tariff Act, 1975 was also not to be treated as CVD for the purpose of imposing the stated restriction.

Conclusion: The credit restriction did not apply to additional duty of customs, and the assessee was entitled to Modvat credit on that duty.

Final Conclusion: The lower orders were set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Where an exemption or credit-restricting notification expressly limits specified duties but omits additional duty of customs from the operative restriction, the omission must be given effect and the credit cannot be curtailed by implication.

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