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2012 (11) TMI 961 - HC - Central ExciseMODVAT Credit - manufacture of cement - explosives, grinding media, cylpebs, refractories (fire bricks) steel castings, ball bearings, electrodes, refractory cement, rubber and articles - Following the decision of court in case of Commissioner of Central Excise, Coimbatore & Others vs JAWAHAR MILLS LTD. 2001 (7) TMI 118 - SUPREME COURT OF INDIA held that - Goods for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be capital goods , and, therefore, qualify for availing MODVAT credit. In the case on hand, on examining the above stated articles, it is found that all the articles explosives are used for manufacture of cement and in absence of any of the above stated goods, manufacture of cement is not possible. Applying the user test as laid down by the Supreme Court in the above referred case, the decision of the Tribunal is just, proper and legal - reference is answered accordingly.
Issues:
Whether credit as inputs in terms of Rule 57A of the Central Excise Rules, 1944 is admissible on specific items used in the manufacturing process of cement. Analysis: 1. Explosives: Explosives like Safety Fuses, Detonating Caps, etc., are used in limestone mines for blasting, not in the cement factory. The Tribunal considered them essential for the manufacturing process, as they are used in mines related to mining limestone, a crucial intermediate product. 2. Grinding Media and Cylpebs: These are used in the Cement Ball Mill for grinding clinker to obtain cement. The Tribunal recognized them as capital goods necessary for the grinding process in the cement manufacturing. 3. Refractories and Refractory Cement: Refractories are used as lining in the kiln, essential for insulation and protection. The Tribunal noted that these are crucial for the functioning of the kiln, which is a capital good excluded from the definition of "inputs." 4. Steel Castings: Special castings like liner plates are used in mills to protect the inner shell during grinding. The Tribunal acknowledged their importance in safeguarding the mill's inner wall during the grinding process. 5. Ball Bearings: Considered as components of various machines, not directly related to cement manufacturing. The Tribunal found them to be inputs for machines but not directly related to cement production. 6. Electrodes: Arc welding electrodes used for welding metal parts, not directly related to clinker or cement manufacturing. The Tribunal ruled that these electrodes are not considered inputs for cement production. 7. Rubber and Rubber Articles: Conveyor belts made of rubber are used for material handling, not in the manufacturing of final products. The Tribunal concluded that these belts are not directly used in the production of cement but for material handling purposes. 8. Legal Precedents: Referring to legal precedents, the Tribunal highlighted the broad interpretation of "capital goods" and the importance of goods used in the manufacturing process to qualify for MODVAT credit. The Tribunal applied the user test to determine the essentiality of the items in the manufacturing process of cement. 9. Conclusion: The Tribunal answered the reference affirmatively, stating that the items in question are crucial for the manufacturing process of cement and qualify as inputs for availing MODVAT credit. The decision was based on the user test and legal principles established by the Supreme Court, ensuring a just and proper outcome. This comprehensive analysis of the judgment from the Chattisgarh High Court highlights the specific items in question, their role in the cement manufacturing process, and the legal principles applied to determine their eligibility for MODVAT credit.
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