2011 (9) TMI 725 - HC - Central Excise

Cenvat Credit - explosives used outside the factory premises - Held That - Rule 57A is merely meant to enlarge the meaning of the word input and does not in any way restrict the use of the input within the factory premises nor does the said rule 57A require the inputs to be brought into the factory premises at any point of time. The schemes of MODVAT and CENVAT credit are not different - 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. Interpretation of Rule 2(f) of the Cenvat Credit Rules, 2001 regarding the allowance of credit on explosives used outside the factory premises.
2. Applicability of Rule 57-AA(d) of the Central Excise Rules, 1944 in determining eligibility of inputs for Modvat purpose.
3. Comparison between Rule 2(f) of the Cenvat Credit Rules, 2001 and Rule 57-AA(d) of the Central Excise Rules, 1944.
4. Analysis of the Supreme Court judgments in Jaypee Rewa Cement v. Commissioner of Central Excise, M.P. and Vikram Cement v. Commissioner of Central Excise, Indore in relation to the issue at hand.

Interpretation of Rule 2(f) of the Cenvat Credit Rules, 2001:
The case involved a dispute over the allowance of credit under Rule 2(f) of the Cenvat Credit Rules, 2001, specifically concerning the use of explosives outside the factory premises. The appellant questioned whether the credit could be allowed for explosives used outside the factory, as the rule specifies credit for inputs used within the factory of production. The respondent claimed Modvat credit for explosives used outside the factory for producing limestones, a raw material for cement production. The Commissioner (Appeals) allowed the credit for inputs received within a specific period but disallowed it for inputs received after a certain date. The CESTAT, relying on previous decisions, held that the explosives used outside the factory were eligible inputs for Modvat purposes under Rule 57-AA(d) of the Central Excise Rules, 1944.

Applicability of Rule 57-AA(d) of the Central Excise Rules, 1944:
Rule 57-AA(d) defines "input" as goods used in or in relation to the manufacture of final products within the factory of production. The CESTAT concluded that the explosives used by the respondent for mining limestones outside their cement factory were eligible inputs for Modvat purposes. This decision was based on the interpretation that the explosives fell under the definition of "input" as per Rule 57-AA(d). The CESTAT's ruling was supported by the case law and the specific wording of the rule, which encompassed goods used directly or indirectly in the manufacturing process.

Comparison between Rule 2(f) of the Cenvat Credit Rules, 2001 and Rule 57-AA(d) of the Central Excise Rules, 1944:
The definition of "inputs" under Rule 2(f) of the Cenvat Credit Rules, 2001 was found to be similar to that of Rule 57-AA(d) of the Central Excise Rules, 1944. This similarity in definitions played a crucial role in determining the eligibility of the explosives used outside the factory premises for claiming Modvat credit. The alignment between the two rules helped in establishing the admissibility of the credit based on the interpretation of the relevant provisions.

Analysis of Supreme Court Judgments:
The Supreme Court's judgments in Jaypee Rewa Cement v. Commissioner of Central Excise, M.P. and Vikram Cement v. Commissioner of Central Excise, Indore were pivotal in resolving the issue at hand. The Court clarified that the use of explosives outside the factory premises for manufacturing intermediate products, like limestones for cement production, still qualified for claiming credit. The decision in Vikram Cement v. Commissioner of Central Excise, Indore emphasized the continuity between MODVAT and CENVAT credit schemes, rejecting any distinction that would disallow the application of previous judgments. This legal precedent provided a clear guideline for interpreting the rules and settling the dispute regarding the eligibility of credits for inputs used outside the factory premises.

In conclusion, the judgment highlighted the importance of aligning legal interpretations with established rules and precedents to determine the admissibility of credits in excise matters. The detailed analysis of the rules, case law, and Supreme Court judgments provided a comprehensive framework for resolving the dispute and dismissing the appeal based on settled legal principles.

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