Full Judgment
ORAL ORDER:
(APPEAL UNDER SECTION 35-G(2) OF THE CENTRAL EXCISE ACT, 1944)
SATISH K. AGNIHOTRI, J.
1. The present appeal filed under section 35-G(2) of the Central Excise Act,1944 arises from the order dated 28.11.2003 (Annexure A/1) passed by the Northern Bench of Customs, Excise and Service Tax Appellate Tribunal (for short `CESTAT') whereby the appeal filed by the respondent was allowed.
2. The substantial question of law raised by the appellant is asto whether the credit under Rule 2(f) of the Cenvat Credit Rules, 2001, on explosives used outside the factory premises, can be allowed when the rules stipulates that the credit is allowed on the inputs which are used within the factory of production.
3. The facts, in brief, are that the respondent admittedly used Ammonium Nitrate and other explosive materials outside the factory mines for production of lime stone which was used in the factory of the respondent for production of cement. The respondent claimed Modvat credit on the explosives used outside the factory for the purpose of producing limestones which is a raw material for production of cement in the factory. The Assistant Commissioner of Central Excise, Bilaspur, disallowed the entire credit vide order dated 17.07.2002. Against the said order, the respondent preferred an appeal before the Commissioner (Appeals) Central Excise, Raipur, wherein the Commissioner (Appeals) held that the credit of duty is allowable to the respondents on the inputs received by them between 01.04.2000 to 30.06.2001 but it is not admissible on the inputs received from 01.07.2001. Being aggrieved, the respondent filed an appeal before the CESTAT. The CESTAT, relying on a decision in case of Commissioner v. J.K.Udaipur Udyog Ltd and Commissioner v. Birla Corporation Ltd.2 held that the relevant period was April to September, 2000 i.e. prior to the date 01.07.2001 on which Cenvat Credit Rules, 2001 came into force, came to conclusion that the explosives used by the respondent for mining lime stones at sites outside their cement factory were eligible inputs for Modvat purpose. In the case, it was held that the explosives used were eligible under clause (d) of Rule 57-AA of the Central Excise Rules, 1944. Rule 57-AA(d), reads as under:
"57-AA.(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 products, 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, and also includes lubricating oils, greases, cutting oils and coolants."
4. Clause (f) of Rule 2 of the Cenvat Credit Rules, 2001, reads as under:
"inputs 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 cleared along with the final products, 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 purposes, within the factory of production."
5. The definition under Rule 2(f) of the Cenvat Credit Rules, 2001 is para materia to that of Rule 57- AA(d) of the Central Excise Rules, 1944.
6. Explanation to Rule 57-A(1) of the Central Excise Rules, 1944, reads as under:
"Explanation. - For the purpose of this rule "inputs" includes -
(a) inputs which are manufactured and used within the factory of production or in relation to the manufacture of final products, and
(b) xxx xxx xxx"
7. The Supreme Court, while considering Rule 57-A of the Central Excise Rules, 1944, in Jaypee Rewa Cement v. Commissioner of Central Excise, M.P.3 held as under:
"9. The question which, however arises for consideration is whether it is necessary for the explosive to be used within the factory premises where the manufacture of cement takes places.
10. Reading of Rule 57A clearly shows that the notification is to specify the goods used in or in relation to the manufacture of the final product whether directly or indirectly. In the present case, inputs which are used in relation to the manufacture even directly would be regarded as an input for the purpose of Rule 57A. Sub-rule (1) of Rule 57A does not, in any way, specify that the inputs have to be utilized within the factory premises. The explanation contained in Rule 57A is merely meant to enlarge the meaning of the word `input' and does not in any way restrict the use of the input within the factory premises nor does the said rule 57A require the inputs to be brought into the factory premises at any point of time.
13. On the explosives a duty had been paid and the appellants 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."
8. The above stated ratio was doubted in CCE v. J.K.Udaipur. A three Judges Bench of the Supreme Court, in Vikram Cement v. Commissioner of Central Excise, Indore5, held as under:
"24. The schemes of MODVAT and CENVAT credit are not therefore different and we are unable to agree with the conclusion of the Court in J.K. Udaipur Udyog that the decision in Jaypee Rewa Cement would have no application to the CENVAT Rules.
25. In our opinion the doubt expressed by the referring Bench about the correctness of the decision in CCE v. J.K. Udaipur Udyog Ltd. was well founded. Having regard to the fact that the CENVAT Rules in effect substitute the MODVAT Rules, the decision in Jaypee Rewa Cement would continue to apply. The decision in CCE v. J.K. Udaipur Udyog Ltd. holding to the contrary is, in our opinion, not good law. The reference is answered accordingly. All the appeals and special leave petitions will now be listed for being disposed of in the light of this judgment."
9. In view of the foregoing, the Cenvat Credit Rules, 2001 are not different from Modvat Credit Rules and the question of law raised herein, has already been settled by the Supreme Court in Vikram Cement5. Thus, the question of law proposed to be raised herein, is not longer res integra and as such, the appeal is dismissed.