Modvat credit on inputs from export units is capped at the lesser of customs-equivalent duty and actual duty paid.

Credit under the relevant Central Excise notification for inputs received from a 100% export oriented unit is limited by the proviso to the lesser of two figures: the additional duty of customs leviable on like imported goods and the actual duty paid by the unit. The notification was treated as materially identical to the earlier provision considered by a Larger Bench, so the settled approach was applied without dissecting duty into separate customs-duty components. On that basis, admissible Modvat credit is confined to the lower amount, and the denial of credit from 28-2-1999 was set aside for the period already availed in March and April 1999.

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Issues: Whether credit under the relevant Central Excise notification in respect of inputs received from a 100% export oriented unit is to be restricted to the additional duty of customs leviable on like imported goods, or to the actual duty paid by the unit where that duty is lower.

Analysis: The governing notification was treated as materially identical to the predecessor notification considered by the Larger Bench. On that basis, the Tribunal applied the settled principle that duty on clearances by a 100% export oriented unit is not to be dissected into separate customs-duty components for the purpose of Modvat credit. The correct method is first to ascertain the additional duty of customs leviable on like imported goods and then compare it with the actual duty paid on the inputs cleared by the 100% export oriented unit. The available credit is confined to the extent permitted by the proviso to the notification, namely the lesser of the two figures.

Conclusion: The appellants were entitled to the credit already availed for March and April 1999, and the denial of credit from 28-2-1999 was set aside.

Ratio Decidendi: Where a notification restricts credit on inputs from a 100% export oriented unit to the additional duty leviable on like imported goods, the admissible credit is limited to the lesser of the additional duty payable on comparable imports and the actual duty paid by the unit.

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