2019 (1) TMI 972 - AT - Central Excise

CENVAT Credit - input - 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 - The cement used herein is a good which has relation, though indirectly, with the extraction of ore thus it qualifies for audit under Rule 2(k), prevailing during the relevant period. Further, 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 in the impugned cases. Therefore, the appellant is entitled to treat the same as input. The clarification to this effect is rather available in circular no. 943/4/2011-CX dated 29.04.2011. Thus, 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.

Summary

Issues:
1. Whether cement used in mines for filling pits after ore extraction qualifies as an input for cenvat credit.
2. Interpretation of the definition of "input" under Section 2(k) of the Central Excise Tariff Act.
3. Application of relevant legal precedents to determine the eligibility of cement as an input for cenvat credit.

Analysis:

Issue 1:
The primary question is whether the cement used in filling pits after ore extraction in mines can be considered an input for cenvat credit. The appellant argues that the cement is essential for compliance with mining regulations and is indirectly related to the extraction of ore, thus making it eligible for credit. The department, however, relies on the exclusion clause stating that goods with no relationship to the final product's manufacture are not considered inputs.

Issue 2:
The definition of "input" under Section 2(k) of the Act is crucial in determining the eligibility of cement for cenvat credit. The provision includes goods used in the factory for the final product, but excludes items like those used for construction or with no relation to manufacturing. The Tribunal analyzes whether the cement used in mines falls within the definition of an input based on the statutory requirements and mining regulations.

Issue 3:
Legal precedents play a significant role in the decision, with references made to various judgments. The Tribunal cites the decision of the Hon'ble Apex Court in JK Cottons Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer, emphasizing the integral connection of processes with the final product's manufacture. Additionally, the Tribunal refers to past cases like Fertilizer Cooperation Ltd. v. CCE Ahmedabad to support the argument that goods used indirectly in the manufacturing process can qualify as inputs.

In conclusion, the Tribunal rules in favor of the appellant, stating that the cement used in filling pits in mines is indirectly related to the extraction of ore, making it eligible as an input for cenvat credit. The decision is supported by statutory requirements, legal interpretations, and precedents. The orders disallowing the credit are set aside, and both appeals are allowed.