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2018 (10) TMI 1466 - AT - Central ExciseCENVAT Credit - inputs - cement used in mines for filling pits after extraction of ore - whether the cement used by the appellant who were asked to extract ore from the proposed ore block but only after conducting stopping operations of the said ore blocks, can be called as input? Held that - Without filling of the ore pits the appellant was statutorily, not in position to extract the ore, i.e. the final product thus the use of cement was very much in relation to the manufacture which was extraction of ore - the appellant is entitled to treat the same as input. The adjudicating authority below has committed an error while denying the credit on cement used by appellant in filling pits for making area fit for ore extraction - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility of Cenvat credit on cement used in mining operations. 2. Interpretation of the term "input" under Rule 2(k) of the Cenvat Credit Rules. 3. Applicability of previous judicial decisions and statutory provisions to the present case. 4. Compliance with statutory mandates for mining operations. Detailed Analysis: 1. Eligibility of Cenvat Credit on Cement Used in Mining Operations: The primary issue revolves around whether the cement used by the appellant in mining operations, specifically for filling pits post-extraction of ore, qualifies as an "input" for availing Cenvat credit. The department disallowed the credit, arguing that the cement was used for maintenance and repair, thus not directly related to the manufacturing process. However, the appellant contended that the cement was essential for complying with mining regulations and thus should be considered an input. 2. Interpretation of the Term "Input" under Rule 2(k) of the Cenvat Credit Rules: The definition of "input" under Section 2(k) of the Cenvat Credit Rules includes all goods used in the factory by the manufacturer of the final product, excluding goods used for construction or maintenance. The appellant argued that the cement used for filling pits is indirectly related to the extraction of ore, thus qualifying as an input. The Tribunal analyzed the statutory definition and previous judicial interpretations, concluding that the cement used in mining operations falls within the ambit of "input" as it is integrally connected to the manufacturing process. 3. Applicability of Previous Judicial Decisions and Statutory Provisions to the Present Case: The department relied on a decision by the Hon'ble High Court of Rajasthan, which held that cement used for construction or maintenance of mines is not an eligible input for Cenvat credit. However, the Tribunal distinguished this case, noting that it was decided before the 2011 amendment to the definition of "input." The Tribunal referred to various judicial precedents, including the decisions in Prism Cement Ltd. and JK Cotton Spinning and Weaving Mills Co. Ltd., which supported the broader interpretation of "input" to include goods used indirectly in the manufacturing process. 4. Compliance with Statutory Mandates for Mining Operations: The Tribunal examined the Metalliferous Mines Regulations Act, 1961, and the Mines Act, 1952, which mandate the filling of pits with cement before commencing ore extraction. The appellant had complied with these statutory requirements, and the Tribunal held that such compliance makes the cement an integral part of the manufacturing process. The Tribunal emphasized that statutory compliance is essential for the extraction of the final product, thereby qualifying the cement as an input. Conclusion: The Tribunal concluded that the cement used by the appellant in mining operations qualifies as an input under Rule 2(k) of the Cenvat Credit Rules. The statutory requirement to fill pits with cement before extracting ore establishes a direct relationship between the cement and the manufacturing process. Consequently, the Tribunal set aside the impugned orders and allowed all six appeals, granting the appellant the right to avail Cenvat credit on the cement used in mining operations. (Pronounced in the open court on 26.10.2018)
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