It has been brought to the notice of the Board that Central Excise Authorities are not allowing MODVAT credit of the entire CVD paid on the car kit imported in CKD/ SKD condition assessed to duty as a complete car at the rate of 40% by the Customs Authorities. It has been further reported that some Commissionerates are restricting the MODVAT credit on CKD car packs to the tune of 15% whereas in other Commissionerates, MODVAT credit is being denied altogether.

2.     Matter has been examined in the Board. I am directed to say that the goods have been assessed to duty by the Customs Authorities as per the rate applicable to the complete car when imported in CKD/ SKD condition into a car amounts to manufacture as per the Note 6 of Section XVII of the Central Excise Tariff Act, 1985. Hence, the CKD/SKD car packs are inputs for the fully assembled car and accordingly, MODVAT credit of entire CVD paid is admissible on such car packs imported in CKD/SKD condition. The Central Excise Authorities have no power to restrict the MODVAT credit of the entire duty paid in this case as per the MODVAT Rules.