1996 (4) TMI 344 - AT - Central Excise

Summary

Issues:
1. Modvat benefit on high explosives used in mining operations for blasting limestone.
2. Modvat credit for grinding media in coal mills used in cement manufacture.
3. Eligibility of lignite and lining matter as inputs in cement manufacture.

Issue 1: Modvat benefit on high explosives used in mining operations for blasting limestone:
The appeal filed challenged the grant of Modvat benefit to the respondent for using high explosives in mining operations for blasting limestone. The Appellant argued that since limestone is the end product and not high explosives, Modvat credit should not be allowed. The Respondent contended that the wide interpretation of "used in relation to manufacture" should include high explosives. The East Regional Bench decision supported the Respondent, but the South Regional Bench limited Modvat credit to explosives used in licensed factory premises for obtaining limestone for cement manufacture. Due to conflicting decisions, the matter was referred to the Hon'ble President for resolution.

Issue 2: Modvat credit for grinding media in coal mills used in cement manufacture:
The second appeal involved the disallowance of Modvat credit for grinding media (balls) used in coal mills for cement manufacture. The Consultant argued that grinding balls are consumed in the cement manufacturing process and should be considered an input. However, the DR contended that grinding media's purpose is to crush raw materials and not directly related to cement manufacture. Previous Tribunal cases supported Modvat credit for grinding media, but the South Regional Bench held otherwise. The matter was referred to the Hon'ble President for clarification.

Issue 3: Eligibility of lignite and lining matter as inputs in cement manufacture:
Lastly, the Consultant for India Cements Ltd. argued that lignite and lining matter should be considered inputs in cement manufacture. However, it was concluded that lining plates and lignites are integral parts of equipment and not inputs directly related to cement manufacture, affirming the lower authority's reasoning.

In summary, the judgment addressed the conflicting interpretations of "used in relation to manufacture" concerning high explosives and grinding media in cement manufacture, leading to the referral of both issues to the Hon'ble President for resolution. Additionally, the eligibility of lignite and lining matter as inputs in cement manufacture was clarified, affirming the lower authority's decision.