Per V.K. Agrawal :

In these appeals filed by M/s. Vikram Ispat (A Unit of M/s. Grasim Industries Ltd.) and M/s. Kundalia Industries, references have been made to the Larger Bench on the question of quantum of Modvat credit of the duty paid on inputs available to them under Rule 57A of the Central Excise Rules read with Notification No. 5/94-CE, dated 1.3.1994.

2. Briefly stated the facts are that M/s. Vikram Ispat manufacture H.P. sponge Iron and avail of Modvat credit of the duty paid on inputs under Rule 57A of the Central Excise Rules. One of the inputs is Iron Ore Pellets which is either imported, procured from domestic manufacturer or procured from 100% Export Oriented Undertakings (100% E.O.U.). Notification No. 2/95-CE, dated 4.1.1995 provides the effective rate of duty of excise on goods manufactured in a 100% E.O.U. and cleared to the Domestic Tariff Area (D.T.A.). According to Notification the duty payable under Section 3 of the Central Excise Act will be 50% of each of the duties of Customs leviable under Section 12 of the Customs Act read with any other notification for the time being in force provided that the amount of duty payable shall not be less than the duty of excise leviable on the like goods manufactured by a manufacturer in DTA. In case of procuring of Pellets from 100% E.O.U., the quantum of Modvat credit is determined in terms of Notification No. 5/94.

2.2 According to the Department, duty paid under Notification No. 2/95 comprises of two elements-basic customs duty and Additional duty of Customs and the entitlement for Modvat credit is required to be restricted to the component of additional duty of customs. On the other hand, the contention of the Appellants is that the 100% EOUs pay duty of excise under Central Excise Act and Notification No. 2/95-CE only determines the quantum of such excise duty required to be paid; that the entitlement has to be seen in the light of Notification No. 5/94-CE which provides for availment of credit of duty of excise which has been paid by a 100% EOU subject to the restriction that the credit shall not exceed the additional duty leviable on like goods; that, therefore, one has to ascertain the additional duty leviable and then to allow the Modvat credit to the extent to which it has been actually paid subject to the ceiling of additional duty leviable.

2.4 The Referring Bench has observed that two different Benches of the Appellate Tribunal have taken diametrically opposing views in the following cases :-

(i) M/s. Weston Electronics Ltd. Vs. CCE, New Delhi, Final Order No. A/766/94-NRB dated 24.8.94 (hereinafter referred to as First Weston case)

(ii) CCE, Meerut Vs. Weston Electronics Ltd., 1997 (21) RLT 549 = 1997 (95) ELT 624 (T) (hereinafter referred to as Second Weston case)

2.5 Similarly M/s. Kundalia Industries received their inputs from a 100% E.O.U. which discharged the duty liability in accordance with the Notification No. 97/91-CE. The Northern Regional Bench has also referred the matter to the Larger Bench, noticing the contrary judgment of the Tribunal in Weston Electronics cases.

3.1 Shri C.S. Lodha, learned Advocate for M/s. Vikram Ispat, submitted that Notification No. 18/94-Cus dated 1.3.94 provides a concessional rate of duty @ 5% on Iron Ore Pellets falling under Heading 26.01 of the First Schedule to the Central Excise Tariff Act; that these pellets are also chargeable to additional customs duty of 10%, equivalent to the duty of excise for the time being leviable in India on like goods; that for clearance of goods to DTA by 100% E.O.Us., they are liable to pay duty of Excise under Section 3 of the Central Excise Act, and what is paid by 100% E.O.Us is, therefore, duty of Central Excise; that vide Notification No. 2/95-CE dated 4.1.95, the duty chargeable on all excisable goods manufactured by 100% E.O.Us is 50% of each of the duties of customs which would be leviable under Section 12 of the Customs Act; that thus the excise duty payable on iron ore pe