2001 (8) TMI 1332 - SC - Central Excise

Whether the explosives used in the mining operation must be regarded as inputs and in respect of which notification had been issued by the Central Government in the Official Gazette and credit should be allowed in terms of the said Rule? - Whether it is necessary for the explosives to be used within the factory premises where the manufacture of cement takes place? Held that - Appeal allowed. As on the explosives a duty had been paid and the appellants would be entitled to claim credit because the explosives were used for the manufacture of the intermediate product, namely, lime stone which, in turn, was used for the manufacture of cement.

Issues Involved:
1. Eligibility of Modvat credit for explosives used in mining limestone for cement manufacture.
2. Interpretation and applicability of Rule 57A, 57F, and 57J of the Central Excise Rules.
3. Validity of show cause notices disallowing Modvat credit for high-speed diesel and explosives.
4. Specific reliefs and dismissals in related appeals and writ petitions.

Issue-wise Detailed Analysis:

1. Eligibility of Modvat credit for explosives used in mining limestone for cement manufacture:
The appellants, M/s. Jaypee Rewa Cement, argued that explosives used for mining limestone, an essential raw material for cement, should be considered as inputs eligible for Modvat credit under Rule 57A of the Central Excise Rules. The excise authorities and the Tribunal rejected this, stating that Rule 57F requires inputs to be used within the factory premises, which was not the case for the explosives used in mining.

2. Interpretation and applicability of Rule 57A, 57F, and 57J of the Central Excise Rules:
- Rule 57A: The Court noted that Rule 57A allows credit for duty paid on goods used "in or in relation to the manufacture of the said final products," without specifying that the inputs must be used within the factory premises. The explanation in Rule 57A is meant to broaden the definition of "inputs" rather than restrict it to within the factory.
- Rule 57F: The Tribunal relied on Rule 57F, which concerns the manner of utilization of inputs and requires them to be brought into the factory. However, the Court found that Rule 57J overrides other rules and allows credit for inputs used in intermediate products necessary for the final product's manufacture, regardless of where they are used.
- Rule 57J: This rule allows credit for duty paid on inputs used in the manufacture of intermediate products, which are then used to produce the final product. The Court concluded that the appellants are entitled to Modvat credit for explosives used in mining limestone, as limestone is an intermediate product used to manufacture cement.

3. Validity of show cause notices disallowing Modvat credit for high-speed diesel and explosives:
The Court addressed separate appeals challenging the validity of show cause notices disallowing Modvat credit for high-speed diesel and explosives. The appellants did not contest the Tribunal's decision regarding high-speed diesel but restricted their appeal to explosives. The Court allowed the appeals concerning explosives, following its decision in the case of M/s. Jaypee Rewa Cement.

4. Specific reliefs and dismissals in related appeals and writ petitions:
- CA Nos. 6932/2000, 6900-6905/2000, etc.: These appeals were allowed based on the principle established in the case of M/s. Jaypee Rewa Cement.
- C.A. No. 6064/2001 @ SLP (C) No. 20785/2000: The appeal was allowed, and the reference was answered in favor of the assessee.
- CA Nos. 3965-3968/2001: The appeals were allowed concerning the use of explosives in cement manufacture.
- CA Nos. 6133-35 and 6293/2000: The appeals were allowed based on the decision in CA Nos. 3965-68/2001.
- WP(C) Nos. 676/2000, 29/2001, etc.: The writ petitions were dismissed as withdrawn.
- C.A. No. 4263/2001: The appeal was dismissed as the appellant was not entitled to relief under Rule 57Q.
- C.A. Nos. 279-282/2001, 2368/2001, etc.: The appeals were dismissed as not pressed.

In summary, the Supreme Court allowed Modvat credit for explosives used in mining limestone for cement manufacture by interpreting Rule 57A and 57J broadly, overriding the Tribunal's reliance on Rule 57F. The Court also provided specific reliefs and dismissals in related appeals and writ petitions.

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