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2013 (8) TMI 503 - HC - Central ExciseExplosives as Inputs Eligibility for MODVAT - Whether the Explosives used in mines for blasting lime stone can be considered as inputs eligible for MODVAT in terms of Rule 57A of Central Excise Rules, 1944 -Held that - The explosives used in mining by blasting limestone can be considered as input eligible for MODVAT credit in terms of Rule 57-A of the Rules following Jaypee Rewa Cement Vs. Commissioner of Central Excise, M.P. 2001 (8) TMI 1332 - SUPREME COURT OF INDIA and Vikram Cement Vs. Commissioner of Central Excise, Indore 2006 (1) TMI 130 - SUPREME COURT OF INDIA . If the manufacturer of cement was using duty paid explosives for mining limestone and using such limestone to manufacture cement, though the explosives were not brought within the factory, the manufacturer by virtue of rule 57-A read with Rule 57-J was entitled to MODVAT credit in respect of duty paid on the input - the explosives for blasting mines to produce limestone for use in manufacture of cement/clinkers in factory situated at some distance away from mines, MODVAT cannot be denied on the ground that they were not used as inputs within factory Decided in favor of assesse.
Issues:
Whether explosives used in mines for blasting limestone can be considered as inputs eligible for MODVAT under Rule 57A of Central Excise Rules, 1944? Analysis: The case involved a reference made by the Customs Excise & Gold (Control) Appellate Tribunal to the High Court to decide whether explosives used in mines for blasting limestone could be considered as inputs eligible for MODVAT under Rule 57A of the Central Excise Rules, 1944. The respondent, engaged in cement manufacturing, claimed MODVAT on explosives used in mines for limestone extraction. The Tribunal accepted this claim, prompting the Revenue to seek the High Court's opinion on the matter. The appellant argued that explosives used in mines were not covered under Rule 57A and thus not eligible for MODVAT. On the other hand, the respondent contended that even if explosives were used outside the factory premises for blasting limestone, they should be considered as eligible inputs for MODVAT, citing judgments from the Supreme Court in similar cases. To resolve the issue, the High Court examined Rule 57A of the Central Excise Rules, which pertains to the applicability of MODVAT. The Court referred to the Apex Court's judgments in Jaypee Rewa Cement and Vikram Cement cases, which clarified that inputs used in the manufacture of final products, even if used outside the factory premises, could be considered for MODVAT credit under Rule 57A. The Court highlighted that the law allowed credit on duty paid inputs used in the manufacture of intermediate products, which were then used for final products. Based on the precedents set by the Apex Court, the High Court concluded that explosives used in mining to blast limestone, which was subsequently used in cement manufacturing, qualified as eligible inputs for MODVAT credit under Rule 57A. Therefore, the reference was answered in favor of the respondent, upholding the Tribunal's decision to allow MODVAT on explosives used in mines for blasting limestone. In summary, the High Court's judgment clarified the eligibility of explosives used in mines for blasting limestone as inputs for MODVAT under Rule 57A, aligning with the interpretations provided by the Supreme Court in similar cases.
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