Supreme Court of India
VIKRAM CEMENTversusCOMMISSIONER OF CENTRAL EXCISE, INDORE
- Citation
- 2005 INSC 379
- Decided
- 24 August 2005
- Disposal
- Matter referred to larger bench
- Bench
- B P SINGHS H KAPADIA
Holding
The observations in paragraph 9 of the JK Udaipur Udyog Ltd. decision, which held the MODVAT and CENVAT schemes different with respect to the definition of "input", require reconsideration and the matter must be referred to a larger Bench.
Summary
Vikram Cement, a cement manufacturer, claimed CENVAT credit for duty paid on inputs (explosives, lubricating oil, welding electrodes) and capital goods (limestone crusher, mining equipment) used in its captive limestone mines adjacent to its factory. The department issued show‑cause notices rejecting the credit, arguing that the items were used outside the factory premises. The assessee contended that the definition of "input" under the CENVAT scheme is identical to that under the earlier MODVAT scheme and that the Supreme Court's decision in JK Udaipur Udyog Ltd., which held the schemes different, should be reconsidered. The Court examined the relevant provisions of the Central Excise Act, the MODVAT rules, and the CENVAT Credit Rules (2000‑2002) and held that the observations in paragraph 9 of the JK Udaipur judgment, which distinguished the two schemes, need reconsideration. Consequently, the matter was ordered to be placed before a larger Bench for further consideration.
Issues considered
- The applicability of CENVAT credit to inputs used in mining operations located outside the cement factory premises.
- The eligibility of capital goods used in mines for CENVAT credit under rule 57AA(a)/rule 2(b).
- Whether the definition of "input" under the CENVAT scheme is substantively identical to that under the MODVAT scheme.
- The correctness of the Supreme Court's earlier observation in JK Udaipur Udyog Ltd. distinguishing MODVAT and CENVAT schemes.
Legislation cited
- Additional Duties of Excise (Goods of Special Importance) Act, 1957s. 3
- Additional Duties of Excise (Textiles and Textile Articles) Act, 1978s. 3
- Central Excise Act, 1944s. 3A
- Central Excise Rules, 1944s. 57A, s. 57B, s. 57J, s. 57Q
- Central Excise Tariff Act, 1985s. Chapter 24, s. Chapter 25, s. Chapter 82, s. Chapter 84, s. Chapter 85, s. Chapter 90
- CENVAT Credit Rules, 2001s. 2, s. 57AA, s. 57AB
- CENVAT Credit Rules, 2002s. 2, s. 57AA, s. 57AB
- Customs Tariff Act, 1975s. 3
- Income Tax Act, 1961s. 32
Subjects
CENVAT creditMODVAT schemeinput definitioncapital goodscement industrymining operationslarger bench referralSupreme Court
Judgment
A VIKRAM CEMENT
v.
COMMISSIONER OF CENTRAL EXCISE, INDORE
AUGUST 24, 2005
B
[B.P. SINGH AND S.H. KAPADIA, JJ.]
Central Excise Rules, 1944/CENVAT Credit Rules, 2001/CENVAT
Credit Rules, 2002 :
C R/57AA(d)lr. 2(f)/r.2(g)-"Jnput"-"Capital goods"-Assessee in the
business ofextracting lime stone and manufacturing cement-Claiming credit
of duty paid on "inputs", namely explosives, lubricating oils and welding
electrodes, as also on "capital goods", namely lime stone crusher, mining
equipments etc. under CENVAT Rules, 2000, 2001and2002-Assessee taking
D the stand that there was no difference between MODVAT Scheme and
CENVAT Scheme as regards substantive definition of "input"-Court noticing
observation in JK. Udaipur Udyog Ltd.*, to the effect that schemes for
MOD VAT and CENVAT credits were different, and referring the matter to a
larger Bench for reconsideration of the said case-Central Excise Tariff Act,
1985-Chapter 25.
E
*Commissioner of Central Excise, Jaipur v. JK. Udaipur Udyog Ltd.,
(2004) 171 EL T 289, referred to.
Jaypee Rewa Cement v. Commissioner of Central Excise, MP., (2001)
F 133 ELT 3, cited.
CfVIL APPELLATE JURISDICTION : Civil Appeal No. 1197 of2005.
From the Judgment and Order dated 19.10.2004 ofthe Customs, Excise
and Service Tax Appellate Tribunal, New Delhi in F.O. No. 1118/2004-NB-
G A in A. No. E/2928/2004-NB-A.
WITH
SLP (C) No. 23205/2003, C.A. Nos. 3422, 4120-4122, 4149-4153,
H 7175-7189/2004 and C.A. Nos. 1613, 1815, 2318-2320 of2005.
930
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 931
Joseph Vellapally, T. Mohd. YousufV. Lakshmikumaran, Alok Yadav, A
Rajesh Kumar, Sanjay Grover, M.P. Devnath, Mathivanam, Mrs. Prabha
Swami, Rupesh Kumar, T.A. Khan, Raghunath Kapoor, P. Parmeswaran, Ms.
lndu Sharma and A. T. Rao for the appearing Parties.
The following Order of the Court was delivered : B
In this group of civil appeals/special leave petition, question
of admissibility of credit of the duty paid on "inputs" namely,
explosives, lubricating oils and welding electrodes as also the question of
admissibility of credit on "capital goods" namely, limestone crusher, mining
equipment etc. under Cenvat Credit Rules, 2000, 2001 & 2002 arise for
c
determination.
Since common questions of law and fact arise for determina-
tion, the above civil appeals are clubbed together. For the sake of convenience,
the facts in Civil Appeal No.1197 of 2005 are mentioned herein below. D
Three show-cause notices dated 26.8.2000, 10.2.2003 and 29.1.2003
were issued by the department to the assessee proposing to disallow the credit
on aforestated items on the ground that they were used for extraction of
limestone in the mines and not within the factory in which cement (final E
product) was manufactured ·by the assessee. The assessee replied to each of
the above three show-cause notices by which it submitted that the substantive
definition of "input" as per clause (d) of rule 57 AA of Central Excise Rules,
1944; rule 2(1) of the Cenvat Credit Rules, 2001 and rule 2(g) ofCenvat Credit
Rules, 2002 was in pari-materia and was not different from the definition of
"input" under erstwhile rules 57A and 578 of Central Excise Rules, !944.
F
According. to the assessee, there was no difference between the Modvat
scheme and the Cenvat scheme as far as the substantive definition of "input"
was concerned. According to the assessee, the Cenvat scheme was more
broad-based as compared to the earlier Modvat scheme.
G
The assessees are engaged in the manufacture of cement and clinker
falling under chapter 25 of Central Excise Tariff Act, 1985. They use
explosives, welding electrodes, lubricating oil and crusher for extraction of
limestone and crushing in the mines adjacent to the cement factory of the
assessees. Being aggrieved by the order dated October 30, 2003 confirming H
932 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A the demand, the assessees preferred appeals to the Commissioner (Appeals).
By order dated 27.2.2004, the Commissioner (Appeals) took the view
that the Cenvat credit was admissible only when the inputs or the capital goods
were used by the manufacturer within the factory premises and since the
B above goods were used in the mines adjacent to the factory premises, the
assessees were not entitled to the credit on the aforestated goods.
Aggrieved by the said order of the commissioner dated 27.2.2004, the
assessees filed appeals before the Customs, Excise & Service Tax Appellate
Tribunal, New Delhi. Following the judgment of the Division Bench of this
c Court in the case of Commissioner of Central Excise, Jaipur v. J.K. Udaipur
Udyog Ltd. reported in 2004 ( 171) EL T 289, the tribunal held that input credit
was not available for the reason that the above goods namely explosives,
lubricating oil, welding electrodes & crusher were not used within the factory;
that the same were used in the mines located outside the factory; and
D consequently, the appeals preferred by the assessee stood dismissed. Hence,
these civil appeals.
In the civil appeals preferred by the assessees, a specific ground has been
taken to the effect that the judgment of the Division Bench of this Court in
J.K. Udaipur Udyog Ltd (supra) was in conflict with a three-Judge bench
E decision of this Court in Jaypee Rewa Cement v. Commissioner of Central
Ex~/se, MP. reported in 2001 (133) ELT 3. In the judgment of the Division
Bench of this Court in J.K.. Udaipur Udyog Ltd. (supra), this Couq took the
view inter alia that the Modvat scheme was different and distinct from the
Cenvat scheme whereas according to the assessees, there was no such
F difference except that Cenvat scheme covered inputs, capital goods and
services and, therefore, the said Cenvat scheme was more broad-based. In this
connection, it has been urged that even under rule 57J of the Modvat scheme,
limestone (intermediate product) sent directly to a job worker attracted credit,
which was continued under rule 57 AB(l) of the Cenvat scheme.
G The basic issue which arises for determination in these civil appeals is
the correctness of the observation made vide para 9 of the Division Bench
decision in J.K. Udaipur Udyog Ltd.(supra) which reads as under:-
"The schemes for MODY AT and CENV AT Credits being different
H and in view of the definition of"input" given in sub-rule (d) of Rule
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 933
57AA of the Rules and the omission of a Rule similar to Rule 57J, A
the ratio of Jaypee Rewa Cement (supra) can have no application
here."
In this case, we are concerned with the period September, 2001 to
October, 2002.
B
The Cenvat scheme which was in operation from 1.3.2002 was governed
by Cenvat Credit Rules, 2002 inserted by notification no.5/2002-CE (N.T.),
dated 1.3.2002. These rules replaced Cenvat Credit Rules, 2001 which held
the field from 1.7.2001 to 28.2.2002. Prior to 1.7.2001, the Cenvat scheme
was in vogue from 1.4.2000 to 30.6.200 I and the Modvat scheme was in force C
from 1.3.1986 to 31.3.2000.
The relevant provisions of the Modvat scheme during the period
1.3.1986 to 31.3.2000 were as follows:
"AA. CREDIT OF DUTY PAID ON EXCISABLE D
GOODS USED AS INPUTS:
RULE 57A: Applicability.-(1) The provisions of this section shall
apply to such finished excisable goods (hereafter, in this section,
referred to as the final products) as the Central Government may, by
notification in the Official Gazette, specify in this behalf for the
E
purpose of allowing credit of any duty of excise or the additional
duty under section 3 of the Customs Tariff Act, 1975 (51of1~75),
as may be specified in the said notification (hereafter, in this section,
referred to as the specified duty) paid on the goods used in the
manufacture of the said final products (hereafter, in this section, F
referred to as the inputs).
(2) The credit of specified duty allowed under sub-rule (I)
shall be utilized towards payment of duty of excise leviable on the
final products, whether under the Act or under any other Act, as may
be specified in the notification issued under sub-rule(!) and subject G
to the provisions of this section and the conditions and restrictions,
if any, specified in the said notification.
(3) The Central Government may also specify in the said
notification the goods or classes of goods in respect of which the
H
934 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A credit of specified duty may be restricted.
(4) The credit of specified duty under this section shall be
allowed on inputs used in the manufacture of final products as well
as on inputs used in or in relation to the manufacture of the final
products whether directly or indirectly and whether contained in the
B
final product or not.
(5) Notwithstanding anything contained in sub-rule (1), the
Central Government may, by notification in the Official Gazette
declare the inputs on which declared duties of excise or additional
c duty (hereinafter referred to as declared duty) paid shall be deemed
to have been paid at such rate or equivalent to such amount as may
be specified in the said notification and allow the credit of such
declared duty deemed to have been paid in such manner and subject
to such conditions as may be specified in the said notification even
D if the declared inputs are not used directly by the manufacturer of
final products declared in the said notification, but are contained in
the said final products.
Explanation- For the purposes of the sub-rule, it is clarified
that even if the declared inputs are used directly by a manufacturer
E of final products, the credit of the declared duty shall, notwithstanding
the actual amount of duty paid on such declared inputs, be deemed
to be equivalent to the amount specified in the said notification and
the credit of the declared duty shall be allowed to such manufacturer.
F (6) Notwithstanding anything contained in sub-rule (1), the
Central Government may, by notification in the Official Gazette,
declare the inputs on which the duty of excise paid under section 3A
of the Central Excise Act, 1944 (l of 1944), shall be dee~ed to have
been paid at such rate or equivalent to such amount as' may be
specified in the said notification, and allow the credit of stlch duty
G in respect of the said inputs at such rate or such amount and subject
to such conditions as may be specified in the said notification : .
Provided that the manufacturer shall take all reasonable steps
to ensure that the inputs acquired by him are goods on which the
H appropriate duty of excise as indicated in the documents accompanying
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 935
the goods, has been paid under section 3A of the Central Excise Act, A
1944 (1 of 1944).
RULE 57B : Eligibility of credit of duty on certain inputs. (1)
Notwithstanding anything contained in rule 57 A, the manufacturer
of final products shall be allowed to take credit of the specified duty
paid on the following inputs, used in or in relation to the manufacture
B
of the final products, whether directly or indirectly and whether
contained in the final products or not, namely:-
(i) inputs which are manufactured and used within the factory of
production; c
(ii) paints;
(iii) inputs used as fuel;
(iv) inputs used for generation of electricity or steam, used for D
manufacture of final products or for any other purpose, within
the factory of production;
(v) packing materials and materials from which such packing
materials are made provided the cost of such packing materials
E
is included in the value of the final product;
(vi) accessories of the final product cleared alongwith such final
product, the value of which is included in the assessable value
of the final product:
F
Exp/anation.-For the purpose of this sub-rule, it is hereby
clarified that the term 'inputs' refers only to such inputs as may
be specified in a notification issued under rule 57 A.
(2) The manufacturer of the final products shall not be allowed to take
credit of the duty paid on the following goods, namely:- G
(i) machines, machinery, equipment, apparatus, tools, appliances
or capital goods as defined in rule 57Q (other than those used
as component parts in the manufacture of final products), used
for any purpose in the factory; H
936 SUPREME COURT REPORTS (2005] SUPP. 2 S.C.R.
A (ii) packing materials in respect of which any exemption to the
extent of the duty of excise payable on the cost of the packing
materials is being availed of for packing any final products;
(iii) packing materials or containers, the cost of which is not
included in the value of the final products under section 4 of
B the Act; and
(iv) crates and glass bottles used for aerated water.
RULE 57J Credit ofduty in respect ofinputs used in an intermediate
product.-(1) Notwithstanding anything contained in these rules, the
c manufacturer shall be allowed to take credit of the specified duty
paid on inputs described in column (2) of the Table below and used
in the manufacture of intermediate products described in column (3)
of the said Table received by the said manufacturer for use in or in
relation to the manufacture of final products described in the
D corresponding entry in column (4) of the said Table:
TABLE
S. Description of inputs Description of Description of
No intermediate products final products
E
(I) (2) (3) (4)
I. All goods falling within All goods falling within All goods falling within
the Schedule to the the Schedule to the the Schedule to the
Central Excise Tariff Central Excise Tariff Central Excise Tariff
Act, 1985 ( 5 of 1986), Act, 1985 (5 of 1986), Act, 1985 (5 of 1986),
F other than the other than the other than the
following, namely:- following, namely:- following, namely:-
(i) goods classifiable (i) goods classifiable (i) goods classifiable
under any heading of under any heading of under any heading of
Chapter 24 of the Chapter 24 of the Chapter 24 of the
Schedule to the said Schedule to the said Schedule to the said
G Act; Act; Act;
(ii) goods classifiable (ii) goods classifiable (ii) goods classifiable
under heading Nos, under heading Nos. under heading Nos.
36.05 or 37.06 of the 36.05 or 37.06 of the 36.05 or 37.06 of the
Schedule to the said Schedule to the said Schedule to the said
Act; Act; Act;
H
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 93 7
(iii) goods classifiable (iii) goods classifiable (iii) fabrics of cotton or
A
under sub-heading under sub-heading Nos. man-made fibres falling
Nos.27!0.11, 2710.12, 2710.11, 2710.12, within Chapter 52,
2710.13 or 2710.19 2710.13 or 2710.19 Chapter 54 or Chapter
(except Natural (except Natural 55 of the Schedule to
gasoline liquid) of the gasoline liquid) of the the .A.ct;
Schedule to the said Schedule to the said B
Act; Act;
(iv) high speed diesel (iv) high speed diesel (iv) fabrics of cotton or
oil classifiable under oil classifiable under man-made fibres falling
heading No.27. IO of the heading No.27.10 of the within heading
Schedule to the said Schedule to the said Nos.58.01, 58.02, 58.06
Act. Act. (other than goods
falling within sub-
c
heading No.5806.20)
60.01 or 60.02 (other
than goods falling
within sub-heading
No.6002.1 O) of the
Schedule to the Act. D
(2) The manufacturer of the final products shall take credit
under sub-rule (1) only ifthe intennediate products are manufactured
in a factory as a job work in respect of which the exemption
contained in the notification of the Government of India in the
Ministry of Finance (Department of Revenue) No.214/86-Central E
Excises, dated the 25th March, 1986, has been availed of.
(3) The credit under sub-rule (I) shall be allowed only ifthe
intennediate products received by the manufacturer of the said fmal
products are accompanied by any of the documents as specified
under rule 57G evidencing the payment of duty on such inputs.
F
AAAA. CREDIT OF DUTY PAID ON CAPITAL GOODS
USED BY THE MANUFACTURER OF
SPECIFIED GOODS:
RULE 57Q: Applicability.-{,1) The provisions of this section shall G
apply to goods (hereafter in this section, referred to as the "final
products") described in column (3) of the Table given below and to
the goods (hereafter, in this section, referred to as "capital goods"),
described in the corresponding entry in column (2) of the said Table,
used in the factory of the manufacturer of final products. H
938 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A TABLE
S. Description of capital goods Description of final products
No. falling within the Schedule
to the Central Excise Tariff
Act, 1985 (5 of 1986) and
B used in the factory of the
manufacturer.
(1) (2) (3)
1. All goods falling under All goods specified in the Schedule to
heading Nos.82.02 to 82.11. the Central Excise Tariff Act, 1985
c (5 of 1986), other than the following,
namely:-
(i) all goods falling under Chapter 24;
and
D (ii) all goods falling under heading
Nos.36.05 or 37.06.
(iii) ingots and billets of non-alloy
steel falling under sub-heading
Nos.7206.90 and 7207.90,
manufactured in an induction furnace
E unit, whether or not any other goods
are produced in such induction furnace,
and hot re-rolled products of non-
alloy steel falling under sub-heading
Nos.7211.11, 7211.19, 7211.30,
7211.52, 7211.59, 7211.60, 7211.92,
F 7211.99, 7213.90, 7214.90, 7215.90,
7216.10 and 7216.90 on which duty is
paid under section 3A of the Central
Excise Act, 1944 ( 1 of 1944).
2. All goods falling under
G chapter 84 (other than
internal combustion engines
falling under heading
No.84.07 or 84.08 and of a
kind used in motor vehicles,
compressors falling under
H heading No. 84.14 and of a
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 939
kind used in refrigerating and A
airconditioning appliances
and machinery, heading or
sub-heading Nos.84.15,
85.18, 8422.10, 8424.10, fire
extinguishers falling under
sub-heading No.8424.80, B
8424.91, 8424.99, 84.29 to
84.37, 84.40, 84.50, 84.52,
84.69 to 84.73, 84.76, 84.78,
expansion valves and
solenoid valves falling under
sub-heading Nos.8481.10 of c
a kind used for refrigerating
and airconditioning
appliances and machinery.
3. All goods falling under
chapter 85 (other than those D
falling under heading
Nos.85.09 to 85.13, 85.16 to
85.31, 85.39 and 85.40);
4. All goods falling under
heading Nos.90.11to90.13,
90.16, 90.17, 90.22 (other E
than for medical use), 90.24
to 90.31 and 90.32 (other
than of a kind used for
refrigeration and
airconditioning appliances
and machinery); F
5. Components, spares and
accessories of the goods
specified against S. Nos. I to
4 above;
6. Moulds and dies; G
7. Refractories and refractory
materials;
8. Tubes and pipes and fittings
thereof, used in the factory;
H
940 SUPREME COURT REPORTS [2005) SUPP. 2 S.C.R.
..
A 9. Pollution control equipment;
Io. Grinding wheels and the like
goods falling under sub-
heading No.6801.1 O;
11. Goods falling under heading
B No.68.02; and
12. Lubricating oils, greases,
cutting oils and coolants.
(2)(i) The manufacturer of the final products shall be allowed
c credit of the duty of excise or the additional duty leviable under
section 3 of the Customs Tariff Act, 1975 (51 of 1975) (hereinafter
referred to as "specified duty") paid on the capital goods.
(ii) The manufacturer availing of the credit may utilize the
D same for payment of duty of excise payable on the final products
manufactured in his factory.
(3) Notwithstanding anything contained in sub-rule (1), the
manufacturer of the final products shall be allowed credit of
additional duty leviable under section 3 of the Customs Tariff Act,
E 1975 (51 of 1975) on goods falling under Chapter heading No.98.0 l
of the first schedule to the said Customs Tariff Act, to the extent of
75% of the said additional duty paid on such goods.
(4) A manufacturer of the final products purchasing capital
F goods from a unit situated in a Free Trade Zone or from a hundred
per cent export-oriented undertaking or from a unit in an Electronic
Hardware Technology Park or Software Technology Parks and using
them in manufacture of final products, shall be allowed to take the
credit of the specified duty paid on such capital goods only to the
extent of duty which is equal to the additional duty leviable on like
G goods under section 3 of the Customs Tariff Act, 1975 (51of1975),
equivalent to the duty of excise paid on such capital goods. s'
(5) The credit of the specified duty on capital goods (other
than those capital goods in respect of which credit of duty was
H allowable under any other rule or notification prior to the Ist day of
. VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 941
March, 1977 shall not be allowed if such capital goods were received A
in the factory before the !st day of March, 1997.
(6) A manufacturer shall be allowed credit of specified duty
paid on capital goods manufactured by him for the manufacture of
final products in his factory. B
(7) The credit of the specified duty on capital goods (other
than those capital goods covered under S. Nos.5, 7, 10, 11 and 12
of column (2) of the Table below sub-rule (1) and received in the
factory on or after the !st day of January, 1996, shall not be taken
on a date prior to the date on which such capital goods are installed
c
or, as the case may be, used for manufacture of excisable goods, in
the factory of the manufacture as certified by such manufacturer or
a persGn designated by him for this purpose.
(8) Notwithstanding anything contained in sub-rule (7), a D
manufacturer intending to remove the capital goods from his factory
for home consumption or for export, prior to their being installed or
used, as the case may be, shall be allowed to take credit on the date
on which such capital goods are so removed by him from his factory
on payment of the appropriate duty of excise leviable thereon as E
provided in rule 57S.
RULE 57R. Credit ofduty not to be allowed or denied or varied
in certain circumstances and adjustment in duty credit.- (1) No
credit of the specified duty shall be allowed on capital goods which
are used exclusively in the manufacture of final products other than
F
final products which are exempt from the whole of the duty of excise
leviable thereon under any notification where exemption is granted
based upon the value or quantity of clearances made in a financial
year which are exempt from the whole of the duty of excise leviable
thereon or are chargeable to nil rate of duty except when the final G
product is either.
(i) cleared to a unit in a Free Trade Zone; or
• (ii) cleared to a hundred per cent export-oriented undertaking; or H
942 SUPREME COURT REPORTS (2005] SUPP. 2 S.C.R.
A (iii) cleared to a unit in an Electronic Hardware Technology Park
or Software Technology Parks;
(2) Credit of the specified duty allowed in respect of any
capital goods shall not be denied or varied on the ground that any
intermediate products have come irtto existence during the course of
B
manufacture of the final product and that such intermediate products
are, for the time being, exempt from the whole of the duty of excise
leviable thereon or chargeable to nil rate o+" duty:
Provided that such intermediate products are specified as final
c products in column (3) of the Table below sub-rule (1) of rule 57Q.
(3) The credit of the specified duty paid on the capital goods
shall be allowed to a manufacturer if the capital goods are acquired
by the manufacturer on lease, hire-purchase or loan agreement, from
a financing company subject to the following procedure, namely:-
D
(i) The manufacturer shall file a declaration before the Assistant
Commissioner of Central Excise as required under rule 57T;
(ii) The manufacturer availing credit of the specified duty
E paid on capital goods, who has entered into a financial
arrangement, -
(a) for financing the cost of such capital goods excluding the
specified duty, shall produce a copy of the invoice
F referred to in rule 57T, evidencing payment of specified
duty along with a copy of the agreement entered into by
him with the said financing company; or
(b) for financing the cost of such capital goods including the
specified duty, shall produce a certificate from the financing
G company to the effect that the duty specified on such
capital goods has been paid by the said manufacturer to
such financing company, prior to payment of first lease
rental instalment or first hire-purchase instalment or first
instalment of re-payment of loan, as the case may be,
along with a copy of the agreement entered into with the
•
H
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 943
said financing company. A
(iii) The manufacturer and the financing company shall not claim
depreciation under the Income-tax laws on that part of the value
of capital goods which represents the amount of specified duty
paid on such capital goods.
B
(iv) The relevant documents required for the purpose of availing
credit of the specified duty paid on such capital goods under
rule 57T shall bear the name of the manufacturer along with
that of the financing company.
c
(4) If a manufacturer of final products has taken credit on
any capital goods and subsequently it so happens that any refund of
the duty paid by the manufacturer of capital goods or importer of
capital goods, as the case may be, is allowed to him for any reason,
then the user manufacturer shall accordingly adjust the amount of D
credit in his credit account and if such adjustment is not possible for
any reason, the user manufacturer shall pay the amount in cash equal
to the amount of refund allowed to the manufacturer or, as the case
may be, to importer of capital goods.
(5) If a user manufacturer has taken credit on any capital E
goods and subsequently it so happens that any additional amount of
duty is recovered from the manufacturer of such capital goods or
importer of such capital goods, as the case may be, then the user
manufacturer shall be allowed an additional credit equal to the
amount of such additional amount recovered. F
(6) The provisions of sub-rule (5) shall not apply in cases
where the duty on capital goods has been short levied or short paid
or has been erroneously refunded by reason of fraud, collusion or
any wilful mis-statement or suppression of facts or contravention of
any provisions of the Act or the rules made thereunder with the intent G
to evade payment of duty.
(7)(i) The additional credit as per sub-rule (5) shall be allowed
by the proper officer on the basis of a certificate issued by the
Superintendent of Central Excise having jurisdiction over the factory, H
944 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A or as the case may be, by the proper officer in the customs area, from
where such capital goods were originally cleared.
(ii) The said certificate shall indicate full descri;ition of the
capital goods, .original duty paid and particulars of the documents
B under which the capital goods were cleared from the factory or, as
the case may be, from the customs area and also the differential duty
recovered from the manufacturer or the importer.
(8) No credit of the specified duty paid on the capital goods
shall be allowed, if the manufacturer, claims depreciation under
c section 32 of the Income-tax Act, 1961 (43 of 1961), or as revenue ..
expenditure under any other provisions of the said Income-tax Act,
in respect of that part of the value of capital goods which represents
the amount of specified duty on such capital goods."
(
D As stated above, the Cenvat scheme was introduced from 1.4.2000 and
has remained in force till date under Cenvat Credit Rules, 2001 followed by
Cenvat Credit Rules, 2002, which reads as follows:-
"AA. CREDIT OF DUTY PAID ON EXCISABLE GOODS
E USED AS INPUTS OR CAPITAL GOODS:
RULE 57AA. Definitions.-For the purpose of this section, -
(a) "capital goods" means-
F
(i) all goods falling under Chapter 82, Chapter 84, Chapter
85, Chapter 90, heading No.68.02 and sub-heading
No.6801.10 of the First Schedule to the Central Excise
Tariff Act, 1985;
G (ii) components, spares and accessories of the goods specified
at (i) above;
(iii) moulds and dies;
H (iv) refractories and refractory materials;
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 945
(v) tubes and pipes and fittings thereof, used in the factory; A
and •
(vi) pollution control equipment,
used in the factory of the manufacturer of the final products.
B
Explanation.- For removal of doubts, it is hereby clarified that
"capital goods" do not include any equipment or appliances
used in an office.
(b) "exempted goods" means goods which are exempt from the C
whole of the duty of excise leviable thereon, and includes goods
which are chargeable to "Nil" rate of duty;
(c) "final products" means excisable goods manufactured or
produced from inputs, except matches;
D
(d) "input" means all goods, except high speed diesel oil and motor
spirit, commonly known as petrol, used in or in relation to the
manufacture of final products whether directly or indirectly and
whether contained in the final product··or not, and includes
accessories of the final products cleared along with the final
product, goods used as paint, or as packing material, or as fuel, E
or for generation of electricity or steam used for manufacture
of final products or for any other purpose, within the factory
of production, and also includes lubricating oils, greases,
cutting oils and coolants.
F
Exp/anation.-The high speed diesel oil or motor spirit,
commonly known as petrol, shall not be treated as an input for
any purpose whatsoever.
RULE 57AB. CENVAT credit.- (1) A manufacturer or producer of
final products shall be allowed to take credit (hereinafter referred to G
as the CENVAT credit) of, -
(i) the duty of excise specified in the First Schedule to the Central
Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as
the said First Schedule), leviable under the Act;
H
946 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A (ii) the duty of excise specified in the Second Schedule to the
Central Excise Tariff Act, 1985, leviable under the Central
Excise Act, 1944 in relation to the goods falling under sub-
heading Nos.2401.90, 2404.40, 2404.50, 2404.99, 5402.20,
5402.32, 5402.42, 5402.43, 5402.52, 5402.62, 5703.90, 8415.00,
8702.10, 8703 .90, 8706.21, 8706.39 and 8711.20 of the said
B
First Schedule;
(iii) the additional duty of excise leviable under section 3 of the
Additional Duties of Excise (Textiles and Textile Articles) Act,
1978 (40 of 1978);
c
(iv) the additional duty of excise leviable under section 3 of the
Additional Duties of Excise (Goods of Special Importance)
Act, 1957 (58 of 1957); and
(v) the additional duty leviable under section 3 of the Customs
D
Tariff Act, 1975, equivalent to the duty of excise specified
under clauses (i), (ii), (iii) and (iv) above,
paid on any inputs or capital goods received in the factory on or after
the first day of April, 2000, including, the said duties paid on any
E inputs or capital goods used in the manufacture of intermediate
products, by a job-worker availing the benefit of exemption co.ntained
in the notification of the Government of India in the Ministry of
Finance (Department of Revenue) No.214/86-Central Excise, dated
the 25th March, 1986, vide GSR No. 547(E) dated the 25th March,
1986, and received by the manufacturer for use in or in relation to
F
the manufacture of final products, on or after the first day of April,
2000.
Explanation.-For removal of doubts it is clarified that the
manufacturer of the final products shall be allowed CENV AT credit
G of additional duty leviable under section 3 of the Customs Tariff Act,
1975 (51 of 1975) on goods falling under Chapter pearling No.98.01
of the First Schedule to the said Customs Tariff Act.
(b) The CENV AT credit may be utilized for payment of any
H duty of excise on any final products manufactured by the manufacturer
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 947
or for payment of duty on inputs or capital goods themselves if such A
inputs are removed as such or after being partially processed, or such
capital goods are removed as such.
Provided that while paying duty in the manner specified under
sub-rule (I) of rule 49 or sub-rule (I) of rule l 73G, as the case may B
be, the CENV AT credit shall be utilized orly to the extent such credit
is available on the fifteenth day of a month for pal:'ment of duty
relating to the first fortnight of the month, and the last day ofa month
for payment of duty relating to the second fortnight of the month or
in case of a manufacturer availing exemption by notification based
on value of clearances in a financial year, for payment of duty C
relating to the entire month.
Explanation.-When inputs or capital goods are removed from
the factory, the manufacturer of the final products shall pay the
appropriate duty of excise leviable thereon as if such inputs or capital D
goods have been manufactured in the said factory, and such removal
shall be made under the cover of an invoice prescribed under rule
52A.
(2) Notwithstanding anything contained in sub-rule (I)-
E
(a) credit of duty in respect of inputs or capital goods produced
or manufactured-
(i) in a free trade zone and used in the manufacture of the
final products in any other place in India; or F
(ii) by a hundred per cent export-oriemed undertaking or by
a unit in an Electronic Hardware Technology Park or
Software Technology Parks and used in the manufacture
of the final products in any place in India,
G
shall be restricted to the extent which is equal to the additional
duty leviable on like goods under section 3 of the Customs
Tariff Act, 1975 paid on such inputs;
(b) credit in respect of- H
948 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A (i) the additional duty of excise under section 3 of the
Additional Duties of Excise (Textiles and Textile Articles)
Act, 1978 (40 of 1978);
(ii) the additional duty of excise under section 3 of the
Additional Duties of Excise (Goods of Special Importance)
B
Act, 1957 (58 of 1957); and
(iii) the additional duty under section 3 of the Customs Tariff
Act, 1975, equivalent to the duty of excise specified under
clauses (i) and (ii) above
c
shall be utilized only towards payment of duty of excise leviable
under the said Additional Duties of Excise (Textiles and Textile
Articles) Act, or under the said Additional Duries of excise (Goods
of Special Importance) Act, on. any final products manufactured by
D the manufacturer or for payment of such duty on inputs themselves
if such inputs are removed as such or after being partially processed.
(c) CENV AT credit of the duty paid on the inputs shall not be
allowed in respect of texturised yam (including draw-twisted or
draw-wound yam) or polyesters falling under heading No.54.02 of
E the said First Schedule, manufactured by an independent texturiser,
that is to say, a manufacturer engaged in the manufacture of
texturised yam (including draw-twisted or draw-wound yam) of
polyesters falling under heading No.54.02, who does not have the
facility in his factory (including plant and machinery) for manufacture
F of partially oriented yam of polyesters falling under sub-heading
No.5402.42 of the said First Schedule.
(d) credit, in respect of addi~ional duty leviable under section 3 of
the Customs Tariff Act, 1975 (51 of 1975), paid on marble slabs or
tiles falling under sub-heading No.2504.2 l or 2504.31 respectively
G of the First Schedule to the Central Excise Tariff Act, 1985 (5 of
1986) shall be allowed to the extent of thirty rupees per square metre.
Explanation.-Where the provisions of any other rule or
notification provides for grant of partial or full exemptlon on
H condition of non-availability of credit of duty paid on any input or
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 949
capital goods, the provisions of such other rule or notification shall A
prevail over the provisions of the rules made under this section.
RULE 57AC. Conditions for allowing CENVAT credit.- (I) The
CENV AT credit in respect of inputs may be taken immediately on
receipt of the inputs in the factory of the manufacture. B
(2) (a) The CENVAT credit in respect of capital goods received
in a factory at any point of time in a given financial year shall be
taken only for an amount not exceeding fifty per cent of the duty
paid on such capital goods in the same financial year.
c
(b) The balance of CENVAT credit may be taken in any
financial year subsequently to the financial year in which the capital
goods were received in the factory of the manufacture, provided that
the capital goods (other than components, spares and accessories,
refractories and refractory materials and goods falling under heading D
No.68.02 and sub-heading 6801.10 of the First Schedule to the
Central Excise Tariff Act) are sti:I in the possession and use of the
manufacturer of final products in such subsequent years.
(c) CENVAT credit may also be taken in respect of such
capital goods as have been received in the factory, but have not been E
installed, before the 1st day of April, 2000 subject to the condition
that during the financial year 2000-200 I, the credit shall be t"ken
for an amount not exceeding fifty per cent of the duty paid on such
capital goods.
F
Illustration-A manufacturer received machinery on April 16,
2000 in his factory. CENV AT of two lakh rupees is paid on this
machinery. The manufacturer can take credit up to a maximum of
one lakh rupees in the financial year 2000-2001, and the balance in
subsequent years.
G
(3) The CENV AT credit in respect of duty paid on the
capital goods shall be allowed to a manufacturer even if the capital
goods are acquired by the manufacturer on lease, hire purchase or
loan agreement, fr.om a financing company.
H
950 SUPREME COURT REPORTS (2005] SUPP. 2 S.C.R.
A (4) The CENV AT credit in respect of capital goods shall not
be allowed in respect of that part of the value of capital goods which
represents the amount of duty on such capital goods, which the
manufacturer claims as depreciation under section 32 of the Income-
tax Act, 1961 (43 of 1961).
B
(5)(a) The CENVAT credit shall be allowed even if any inputs
or capital goods as such or after being partially processed are sent
to a job worker for further processing, testing, repair, re-conditioning
or any other purpose, and it is established from the records, challans
or memos or any other document produced by the assessee availing
c the CENV AT credit that the goods are received back in the factory
within 180 days of their being sent to a job worker. If the inputs or
the capital goods are not received back within 180 days, the
manufacturer shall pay an amount equivalent to the CENV AT credit
attributable to the inputs or capital goods by debiting the CENV AT
D credit or otherwise. However, the manufacturer can take the CENV AT
credit again when the inputs or capital go:>ds are received back in
his factory.
(b) CENV AT credit shall also be allowed in respect of
moulds and dies sent by a manufacturer of final products to a job
E worker for the production of goods on his behalf and according to
his specifications.
(6) The Commissioner of Central Excise having jurisdiction
over the factory of the manufacturer of the final products who has
F sent the inputs or partially processed inputs outside his factory to a
job worker may, by an order in each removal of such inputs or
partially processed inputs, and subject to such conditions as he may
impose in the interest of revenue including the manner in which duty,
if leviable, is to be paid, allow finished goods to be cleared from the
premises of the job worker.
G
(7) Where any inputs are used in the final products which
are cleared for export under bond or used in the intermediate
products cleared for export, the CENV AT credit in respect of the
inputs so used shall be allowed to be utilized by the manufacturer
H towards payment of duty of excise on any final products cleared for
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 951
home consumption or for export on payment of duty and where for A
any reason such adjustment is not possible, the manufacturer shall
be allowed refund of such amount subject to such safeguards,
conditions and limitations as may be specified by the Central
Government by notification in the Official Gazette. No refund of
credit shall, however, be allowed if the manufacturer avails of B
drawback allowed under the customs and Central Excise Duties
Drawback Rules, 1995, or claims a rebate of duty under rule 12, in
respect of such duty."
From the above quoted rules, we find that the definitions of the words
"input" under the erstwhile Modvat scheme stood scattered under rules 57 A C
& 578 whereas under the Cenvat scheme, the definition of the words "input"
and "capital goods" have been consolidated.
The relevant provisions of Cenvat Credit Rules, 200 i are as
follows : D
"Rule 2. Definitions.-In these rules, unless the context otherwise
requires, -
(b) "capital goods" means,-
E
(i) all goods falling under Chapter 82, Chapter 84, Chapter
85, Chapter 90, heading No.68.02 and sub-headi"g
No.6801.10 of the First Schedule to the Tariff Act;
(ii) components, spares and accessories of the goods specified p
at (i) above;
(iii) moulds and dies;
(iv) refractories and refractory materials;
G
(v) tubes and pipes and fittings thereof;
(vi) pollution control equipment; and
(vii) storage tank, H
952 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A used in the factory of the manufacturer of the final products, but does
not include any equipment or appliance used in an office,
(d) "final products" means excisable goods manufactured or
produced from inputs, except matches;
B
(f) "input" means all goods, except high speed diesel oil and motor
spirit, commonly known as petrol used in or in relation to the
manufacture of final products whether directly or indirectly and
whether contained in the final product or not, and includes lubricating
oils, greases, cutting oils, coolants, accessories of the final products
c cleared along with the final product, goods used as paint, or as
packing material, or as fuel, or for generation of electricity or steam
used for manufacture of final products or for any other purpose,
within the factory of production.
D Explanation 1.- The high speed diesel oil or motor spirit,
commonly known as petrol, shall not be treated as an input for any
purpose whatsoever.
Explanation 2.- Inputs include goods used in the manufacture
of capital goods which are further used in the factory of the
E manufacturer;
(g) "manufacture" or "producer" in respect of goods falling under
Chapter 62 of the said First Schedule shall include a person who is
liable to pay the duty of excise leviable on such goods under sub-
F rule (3) of rule 4 of the Central Excise (No.2) Rules, 2001.
To the same effect are the Cenvat Credit Rules, 2002:
"Rule 2. Definitions.-In these rules, unless the context otherwise
requires, -
G
(b) "capital goods" means,-
(i) all goods falling under Chapter 82, Chapter 84, Chapter
85, Chapter 90, heading No.68.02 and sub-heading
H No.6801.10 of the First Schedule to the Tariff Act;
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 953
(ii) pollution control equipment; A
(iii) components, spares and accessories of the goods specified
at (i) and (ii) above;
(iv) moulds and dies;
B
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; and
(vii) storage tank,
c
used in the factory of the manufacturer of the final products, but does
not include any equipment or appliance used in an office,
(e) "final products" means excisable goods manufactured or
produced from inputs, except matches; D
(g) "input" means all goods, except high speed diesel oil and motor
spirit, commonly known as petrol used in or in relation to the
manufacture of final products whether directly or indirectly and
whether contained in the final product or not, and includes lubricating
oils, greases, cutting oils, coolants, accessories of the final products E
cleared along with the final product, goods used as paint, or as
packing material, or as fuel, or for generation of electricity or steam
used for manufacture of final products or for any other purpose,
within the factory of production.
F
Explanation 1.- The high speed diesel oil or motor spmt,
commonly known as petrol, shall not be treated as an input for any
purpose whatsoever.
Explanation 2.- Inputs include goods used in the manufacture
of capital goods which are further used in the factory of the G
manufacturer;
(h) "manufacture" or "producer" in respect of goods falling under
Chapter 61 or 62 of the First Schedule to the Tariff Act shall include
a person who is liable to pay the duty of excise leviable on such
H
954 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A goods under sub-rule (3) of rule 4 of the Central Excise Rules, 2002."
Mr. Lakshmikumaran, learned counsel for the assessee submits that
explosives, lubricating oils, welding electrodes and crushers are used by the
assessee in the manufacture of an intermediate product (limestone) which in
tum is used in the manufacture of the final product (cement) and, therefore,
B
the said items were eligible for credit in terms of rule 57A and rule 57B of
the Modvat scheme as laid down by a three-Judge bench decision in the case
of Jaypee Rewa Cement (supra). He submits that the explosives, lubricating
oil and welding electrodes constituted "inputs" in terms of rule 57B(l)(i) of
the Modvat scheme; that, under rule 57A(4), modvat credit was admissible
c on inputs used in the manufacture of final products as well as on inputs used
in or in relation to the manufacture of the final product, whether directly or
indirectly and whether contained in the final product or not; that the
explanation contained in rule 5 7A was meant to enlarge the meaning of the
word "input" and it did not in any way restrict the use of the input within
D the factory premises nor did it require the inputs to be brought into the factory
premises at any point of time. In this connection, reliance was placed on the
three-Judge bench- decision in the case of Jaypee Rewa Cement (supra).
Learned counsel further submits that the definition of the word "input" under
clause (d) of rule 57 AA of the Cenvat Scheme, 2000 was in pari-materia to
the definition of "input" under the erstwhile rule 57 A and rule 57B of the
E Mod vat Scheme and, therefore, the decision of the three-Judge bench of this
Court in the case of Jaypee Rewa Cement (supra) on the point of admissibility
of credit in respect of explosives used for mining of limestone (intermediate
product) outside the cement factory of the assessee was applicable with equal
force to the instant case involving the question of admissibility of Cenvat
F credit in respect of the same goods used for the same purpose. In this
connection, it was further submitted that the essential condition to be satisfied
for the purposes of taking credit under both the Schemes was that the input
should have been used in or in relation to the manufacture of final product.
Learned counsel submits that the said condition finds place in rule 57B of
G the Modvat scheme as well as in clause (d) of rule 57AA of the Cenvat scheme
followed by rule 2(t) of the Cenvat Credit Rules of 2001 followed by rule
2(g) of the Cenvat Credit Rules of 2002 and, therefore, it was submitted that
the Cenvat scheme was in pari-materia to the Modvat scheme and to that
extent, the decision of the Division Bench in the case of J.K. Udaipur Udyog
Ltd. (supra) needed reconsideration. Learned counsel submits that the goods
H mentioned in clauses (i) to (vi) of rule 57B(l) as it then stood, also had to
VIKRAM CEMENT v. COMMR. OF CENTRAL EXCISE, INDORE 955
satisfy the test embodied in the substantive part of the definition in rule A
57(8Xl ), namely, of it being used in or in relation to the manufacture of final
product. According to the learned counsel, explosives, lubricating oil and
welding electrodes fell in the substantive part of the definition of rule 578(1)
and even if they are to be treated as falling part within the inclusive part in
clauses (i) to (vi) of rule 578(1), still they have to comply with the basic test B
of being used in or in relation to the manufacture of final product.
Learned counsel next submits that rule 57J of the Modvat scheme has
been incorporated in rule 57A8 of the Cenvat scheme under which a
manufacturer of an intermediate product like limestone can be equated to a
job worker. In this connection, reliance was placed on the Circular of C8EC C
dated 29.8.2000 to show that Cenvat is really in substance an extension of
the Modvat scheme.
Learned counsel further urged that applying the test of functional
integrality, the assessee was entitled to credit in respect of "inputs" as the D
mining area and the cement factory were totally inter-dependent on each
other. It was urged that a captive mine always supports the manufacturing of
cement and, therefore, the mining operations formed part of the manufacturing
activity. In this conn.ection, learned counsel submits that the condition of
"use" witllin the factory of p1oduction in section 2(g) is applicable only in
.respect of goods, like furnace oil, used for generation of electricity, which E
in tum is required to be used for producing the final products or for any other
purposes within the factory of production. Learned counsel submits that
production of captive input like electricity under rule 2(g) has to be used i_n
the manufacture of final product or for any other purposes within the factory
of production. Learned counsel submits that the electricity produced captively F
has got to be used in the manufacture of final product and only to that extent,
credit would be admissible on the input (furnace oil). However, the words
"any other purpose" have been introduced in rule 2(g) so that the generated
electricity could also be used for lighting godown, store,·0oms etc. which may
not strictly come within the ambit of the word "factory". Learned counsel
submits that if the last five words of section 2(g), "within the factory of G
production", are left out then the result would be that the assessee would
generate higher amount of electricity than that required for production and
sell the same in the market. Therefore, the words "within the factory of
production" must be read with the words preceding thereto, namely, "generation
of electricity to be used for manufacture of final product or for any other H
956 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A purpose".
On the question of "capital goods'', we find that rule 2(b) of Cenvat
Credit Rules gives a specific definition of the term "capital goods". It is not
an inclusive definition with the result that any exercise to treat an item as
B "capital goods" by adopting any interpretative process will be futile. An item
can be treated as "capital goods" under Cenvat Credit Rules only if it satisfies
that the goods fell under one of the specified chapters or headings of the Tariff
or it is a spare part, component or accessory or that it falls under one of the
specified ·items. Further, the said goods must be used in the factory of the
manufacturer of the fin'l! product. The new rule 2(b) of the Cenvat Credit
C Rules is preceded rule 57AA (a) read with the explanation which in tum was
preceded by rule 57Q(l). Learned counsel submits that rule 57Q of the earlier
Modvat scheme came up for consideration in the case of Jaypee Rewa Cement
(supra) which has not taken into consideration the concept of captive
production of an intermediate product like limestone used in the manufacture
D of cement which concept is now recognized under rule 2(b) of the Cenvat
Credit Rules.
Per contra, learned counsel appearing on behalf of the department
submits that in order to apply Cenvat credit on inputs under rule 57AA, the
inputs should have been used in the factory of production of the final product
E (cement) and as explosives, lubricating oil and welding electrodes were used
at off-factory premises, credit was not available to the assessee. Learned
counsel for the department invited our attention.to the definition of the word
"input" in clause (d) of rule 57 AA and submitted that the definition of the
word "input" in the Cenvat scheme warranted user of the input in the factory
F of the production of the final product, namely, cement.. It was submitted that
the decision of three-Judge bench in Jaypee Rewa Cement (supra) was good
in respect of admissibility of mod vat credit on explosives, lubricating oil and
welding electrodes as "inputs" under rule 57A and 578 of the Modvat scheme
but it was not applicable on the said goods under rule 57AA(d), and that
similarly the assessee was not entitled to credit on capital goods like crushers
G under rule 57AA(a) equal to rule 2(b) of the Cenvat scheme. Learned counsel
further submits that explosives were used in mining operations; that, mines
were licensed under Mining Act whereas the factory of the assessee was
licensed under the Factories Act and, therefore, it cannot be said that the mines
and factory were inter-dependent. Learned counsel urges that there was no
H functional integrality between the mines and the factory and, therefore, the
VIKRAM CEMENT v. COM MR. OF CENTRAL EXCISE, INDORE 957
assessee was not entitled to claim Cenvat credit on explosives under rule A
57AA(d) or under rule 2(!) ofCenvat Credit Rules, 2001 or under rule 2(g)
of Cenvat Credit Rules, 2002.
In the light of the provisions of the Cenvat scheme vis-a-vis Modvat
scheme reproduced hereinabove, we are of the view that the observations
B
made in paragraph 9 of the decision of the Division Bench, quoted above,
in the case of Commissioner of Central Excise, Jaipur v. J.K. Udaipur Udyog
Ltd reported in 2004 ( l 71) EL T 289 needs reconsideration. We are, therefore,
of the view that this case requires consideration by a larger bench. The papers
may be placed before the Hon'ble Chief Justice of India for further directions.
c
R.P. Referred to larger Bench.
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