2006 (3) TMI 760 - SC - Central Excise

Summary

Issues:
1. Interpretation of Notification No. 191/87-CE regarding exemption eligibility.
2. Benefit of exemption notification for goods used in the manufacture of zinc or lead concentrates.
3. Use of explosives in mining operations and its classification as part of the manufacturing process.
4. Legal principles governing the eligibility for exemption under Notification No. 191/87-CE.

Issue 1: Interpretation of Notification No. 191/87-CE regarding exemption eligibility:
The case involved a dispute over the interpretation of Notification No. 191/87-CE dated 4th August, 1987, which provided an exemption for goods used in the manufacture of zinc or lead concentrates. The assessee, engaged in manufacturing explosives, sought the benefit of this notification for supplying explosives to entities involved in mining operations.

Issue 2: Benefit of exemption notification for goods used in the manufacture of zinc or lead concentrates:
The Tribunal initially denied the benefit of the notification to the assessee, citing that the explosives used in mining did not constitute the manufacturing process of zinc or lead concentrates. However, the Supreme Court highlighted that the explosives were indeed used in the extraction of zinc and lead ores, which are crucial inputs for the manufacturing of zinc and lead concentrates.

Issue 3: Use of explosives in mining operations and its classification as part of the manufacturing process:
The contention revolved around whether the explosives used in mining operations could be considered as part of the manufacturing process of zinc and lead concentrates. The High Court, aligning with legal precedents, emphasized that the extraction of zinc and lead ores through mining operations was an integral part of the manufacturing process, thereby justifying the inclusion of explosives used in mining under the exemption notification.

Issue 4: Legal principles governing the eligibility for exemption under Notification No. 191/87-CE:
The Supreme Court, in its judgment, reiterated the principle established in previous cases, including the decision in Jaypee Rewa Cement case, emphasizing that the extraction of essential ores through mining operations is a vital step in the manufacturing chain of zinc and lead concentrates. The Court upheld the High Court's decision, stating that the explosives used in mining operations are indeed utilized in the manufacturing process of zinc concentrates, making the assessee eligible for the exemption under Notification No. 191/87-CE.

In conclusion, the Supreme Court allowed the appeals, setting aside the previous judgment and confirming the assessee's entitlement to the benefit of the exemption notification. The Court emphasized the importance of mining operations in the manufacturing process of zinc and lead concentrates, aligning with established legal principles and precedents.