ORDER
N.N. Mathur, JJ. -
1. This reference petition under Section 35H(1) of the Central Excise Act, 1944 is at the instance of the department seeking reference of the following question of law arising from the order of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi dated 6-12-2000 [2001 (127) E.L.T. 438 (Tribunal)] :-
'Whether the explosive used for blasting of mines for obtaining ores and not in the manufacture of Zinc, are eligible for exemption under Notification No.191/87, dated 4-8-1987?'
2. The respondent Hindustan Zinc Ltd. is a public undertaking. The Company mines Zinc and Lead ore from its own mines at Rajpura, Maton and Zawar. The Company was granted L-6 licence to obtain goods falling under Chapters 28, 29, 36 and 38 without payment of duty for use in the manufacture of Zinc and Lead concentrate in terms of Notification No. 191/87, dated 4-8-1987. The said notification reads as follows :-
'Exemption to goods falling within Chapters 28,29,36 and 38[Add on Page 309 of Central Excise Tariff 1987-88]In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods fallingwithin Chapters 28, 29, 36 and 38 of the Schedule to the Central Excise TariffAct, 1985 (5 of 1986), and used 'in the manufacture of Zinc or Lead concentrates,from the whole of the duty of excise leviable thereon which is specified in thesaid Schedule:
Provided that where such use is elsewhere than in the factory of production, the procedure set out in Chapter X of the said Rules is followed.
[Notification No. 191/87-C.E., dt. 4-8-1987]'
3. The respective mines were issued CT-2 certificates for obtaining . 'of explosives falling under Chapter 36 without payment of duty but on study of process of use of explosive it was found that detonators and detonating fuses are being used for blasting the mines to obtain Zinc and Lead ore through a process of drilling and blasting. The process also includes crushing, grinding, floating and filtering etc. Thus, request was made to the Assistant Collector, Central Excise, Udaipur to issue appealable order for denial of issue of CT-2 certificates for obtaining explosives without payment of duty under the Notification No. 191/87. -The Company explain the process of manufacture of Zinc concentrate as follows :-
'Zinc or Lead ore is extracted from the mines by explosives by the process of drilling and blasting; Zinc or Lead thus procured is first crushed and then ground; As the Zinc ore are generally low in the Zinc contents, they must be concentrated for direct reduction and further floated in the slurry form to obtain the concentrate by a chemical process and further upgraded to get Zinc Oxide.'
4. Thus, it was contended that the extraction of Zinc and Lead ore is an important and integrated process in the manufacture of Zinc and Lead concentrates, the Assistant Collector held that the explosives are not used in the manufacture of Zinc and Lead concentrates and as such exemption contained in Notification No. 191/87 is not applicable to explosive procured for blasting the mines. Accordingly, the request of the Company was rejected by order dated 7-12-1994. The assessee preferred an appeal which was allowed by the Commissioner of Customs (Appeals) by order dated 26-3-1996. The Commissioner relying on the decision of the Apex Court in the case of Indian Copper Corporation Ltd. v. Commissioner of Commercial Tax, Bihar and Others reported in 1965 (16) STC 259 held that mining operation and the manufacturing process are interdependent and constitute an integrated process. In the opinion of the Commissioner, the explosives used in the mining operation are to be treated and used in the manufacture of Zinc concentrates. The Commissioner held that the conditions of Notification No. 191/87 was fully satisfied. The department preferred an appeal against the said judgment of the Commissioner to the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) which was rejected by the order dated 6-12-2000.
5. We have heard Mr. Ravi Bhansali, learned Counsel for the department and Mr. Rajendra Mehta, learned Counsel for the Hindustan Zinc Ltd. It is submitted by Mr. Ravi Bhansali that the Tribunal has committed error in not following its own judgment in M/s. Jay Pee Rewa Cement reported in 2000 (119) E.L.T. 552 (T-LB) = 2000 (38) RLT1111 wherein it is held that theactivity of mining does not constitute the process of manufacture. It is further submitted that explosives are used for blasting of mines to obtain Zinc and Lead ore from the mines. The use of explosives in mines does not constitute manufacture of Zinc and Lead but only helps extraction of Zinc and Lead ores. The contention is not sustainable for the fact that the decision of CEGAT in M/s. Jay Pee Rewa Cement's case has been reversed by the Apex Court in the case reported in 2001 (133) E.L.T. 3 (S.C.) = JT 2001 (7) SC 261. Jaypee Rewa Cement v. Commissioner of Central Excise, M.P. Jaypee Rewa Cement is manufacturer of cement and lime stone is an essential raw material for the said material, but in order to extract lime stone explosives are used for mining the same. It was contended on behalf of M/s. Jaypee Rewa Cement that explosives used in mining operation must be regarded as inputs and in respect of which notification had been issued by the Central Government in the Official Gazette and credit should be allowed in terms of the said Rules. This contention was not accepted by the excise authorities as well as by the CEGAT. The Tribunal came to the conclusion that Rule 57F was applicable in the said case as explosives had not been brought into the factory and they had been used at a place away from the cement factory. Reading the Rule 57J the Apex Court concluded that even in respect of inputs used in the manufacture of intermediate product which product is then used for the manufacture of a final product, the manufacturer would be allowed credit on the duty paid in respect of the input. The Court further held that on the explosives a duty had been paid and as such the manufacturer would be entitled to claim credit because the explosives were used for the manufacture of the intermediate product, namely, lime stone which, in turn, was used for the manufacture of cement.
6. In Chowgule & Company Pvt. Ltd. v. Union of India reported in 1993 (67) E.L.T. 34 (S.C.) the Court found that where a dealer is engaged both in mining operation as also in processing the mined ore for sale, the two processes being inter-dependent, it would be essential for carrying on the operation of processing that the ore should be carried from the mining site where the mining operation comes to end to the place where the processing is carried on and that would clearly be an integral part of the operation of processing and if any machinery, vehicles, barges and other items of goods are used for carrying the ore from the mining site to the place of processing, they would clearly be goods used in processing of ore for sale.
7. In Indian Copper Corporation Ltd. v. Commissioner of Commercial Tax, Bihar and Others reported in (1965) 16 S.T.C. 259 explaining the expression 'in the manufacture of means the dealer engaged both in mining and manufacturing process, held both the processes interdependent. Thus, there can be no escape from the conclusion that extraction of Zinc and Lead ore is an important and integreted process in the manufacture of Zinc and Lead concentrates. Thus, the explosives used in mining operation are to be treated as used in manufacture of Zinc concentrates for the purpose of satisfying the conditions of Notification No. 191/87.
8. No referable question of law arises from the order of the CEGAT dated 6-12-2000. Hence, the reference petition stands dismissed.