M/S. the India Cements Ltd., Sri Vs. Commr. of Cex, Hyderabad - Court Judgment

Excerpt:
1. in all these appeals, common question of law and facts are involved, hence the stay applications and appeals are taken up together for disposal, as per law.2. the issue pertains to grant of modvat credit on explosives which are used in the mines. the appellants had been denied the modvat credit in respect of explosive used in the mines which were outside the factory.the authorities took the view that the mining activity being outside the factory, modvat credit cannot be extended to mining activity. in this regard, the commissioner (appeals) has relied on the larger bench judgment of 5-members rendered in the case of m/s. jaypee rewa cement, rewa vs. cce raipur [2000 (38) rlt 1111 (cegat-l.b.)] the relevant paragraph relied by him in para 6 of his order is extracted below:- 6. i find that this issue has been extensively dealt with by the 5 member bench of the hon'ble cegat in the case of m/s. jaypee rewa cement, rewa vs. cce, raipur- (2000 (38) rlt 1111 (cegat-i,b)) in which it has been held as under: "the process of manufacture of cement did not extend beyond the bounds of the cement factory as registered with the central excise department under rule 174 and that the mining activity outside the factory, being an activity for procurement of a raw material (limestone), was only a process anterior to the commencement of the process of manufacture of cement and therefore, did not form part of the manufacture." the hon'ble cegat further held that the explosives used for quarrying limestone in mines situated away from the cement factory cannot be held to be "goods used in or in relation to the manufacture of cement and consequently would not qualify to be "inputs" for the modvat credit under rule 57a of the central excise rules,1944.the commissioner (appeals) dismissed the appeals as the issue was covered one.3. ld. consultant shri chidananda rao submits that the dismissals of appeals without grant of hearing is violative of principles of natural justice even if the issue was covered by a larger bench judgment. he submits that the mining activity was within the factory premises in the case of india cements, therefore the non grant of opportunity to explain has resulted in denial of principles of natural justice and seeks for remand of the case in respect of india cements by granting waiver of pre deposit. as against the appellants in vishnu cements also, no opportunity of hearing was granted which is again violative of principles of natural justice. he submits that the tribunal has indeed disposed of the matter finally by the 5-member judgment referred to but yet their right of hearing ought to have been granted. he also very fairly brings to the notice of this bench the final order no.567-570/2001 dated 25.4.2001 in respect of india cements and zuari cements ltd. wherein by applying the ratio of the larger bench judgment noted supra, the tribunal dismissed the stay and the final appeal. he had made a submission that the matter was ceased in reference before the high court of andhra pradesh, madhya pradesh and rajasthan and matter could be kept pending. however, the bench did not accept the plea and dismissed the appeals on the ground that the issue was covered by larger bench judgment and that of the judgment of this bench in the case of madras cements ltd. [1998 (99) elt 395]. he submits that opportunity of hearing ought to have been granted to demonstrate that the factory was within the mining area.4. ld. s.d.r. submits that there is no dispute about the explosives being used in the mines and the activity is outside the factory and not part of manufacturing activity as has been noted by the original authority where the appellants had been given full opportunity of hearing. the matter being covered by larger bench, the commissioner was justified in dismissing the appeals applying the ratio of the judgment.he further submits that all the facts and the reasoning have been gone into in detail by the original authority and there was no dispute about the facts. he submits that in india cements case, the same submission was made by the consultant at the time of hearing of the stay but it was not accepted and by final order no.567-570/2001 dated 25.4.2001.the appeals of india cements and that of zuari cements ltd. were dismissed by following the ratio of the above mentioned judgment.5. on a careful consideration of the submission, we totally agree with the submission of ld.sdr in the present case. the matters have been finally reached finality by 5-member bench of the tribunal rendered in the case of jaypee rewa, rewa vs. cce, raipur (supra). the ld.consultant had made this very submission in the earlier appeal in the case of india cements ltd. where also the commissioner had dismissed all the appeals by applying the ratio of the larger bench judgment. the tribunal in para 4 have clearly recorded that appellants have not shown that the explosives were used within the factory and the fact of the explosive being used in the mine is an admitted one. the findings recorded in para 4 is noted below:- 4. on a careful consideration of the submission, we totally agree with the ld. dr that the issue is fully decided by the tribunal judgments of larger bench. in this particular case, the explosives have been used in mines located outside the factory. once an item has been used outside the factory, consistently the tribunal has taken a view that the assessee cannot claim the benefit of modvat credit. the order-in-original of the assistant commissioner also noted large number of judgments in this regard which are all in favour of the revenue. at this stage, ld. consultant interrupts and submits that the mines were all located inside the factory. we are not in a position to appreciate this interruption and also we notice that this issue was not the point raised before either of the authorities. no documents have been produced. neither approved plan has been produced to show that the mines were located inside the factory. mines are governed by the mines act whereas the factories are registered under the factories act. the submissions made is totally unsustainable, as their submissions were duly considered by the commissioner and by following the larger bench judgment he rejected the appeals. hence, there cannot be any doubt in the matter that the explosives were used in mines located outside the factory and the larger bench judgment is binding on co-ordinate benches. therefore, by rejecting the stay applications, the appeals are taken up and respectfully following the ratio of the tribunal, all the four appeals are dismissed.the ratio of the larger bench judgment (supra) and that of the madras cements ltd. (supra) and also that of india cements ltd. by final order no.567-570/2001 applies to the facts of the present case and therefore, by applying the ratio thereof, the stay applications and appeals are dismissed.6. in the case of my home cement industries ltd., ld. advocate shri v.j. sankaram has sent a request for adjournment. we are not inclined to grant any adjournment as the issue is totally covered and no useful purpose will be served by adjourning the matter. the larger bench judgment of 5 members in the case of jaypee rewa cements, rewa (supra) and other cited judgments clearly applies to the facts of the case and this bench is bound by these judgments in terms of judicial discipline.7. the plea taken by ld. consultant that the matter is ceased in reference is not pertinent to the issue because there is no stay of the operation of the larger bench judgment of the tribunal. the appellants are at liberty to file reference application before the concerned high courts to agitate the issue. in so far as the tribunal is concerned, the issue has reached finality and therefore, the appeals of my home cement industries ltd. are also dismissed following the ratio of the judgment cited supra.

Judgment:
1. In all these appeals, common question of law and facts are involved, hence the stay applications and appeals are taken up together for disposal, as per law.

2. The issue pertains to grant of Modvat credit on explosives which are used in the mines. The appellants had been denied the Modvat credit in respect of explosive used in the mines which were outside the factory.

The authorities took the view that the mining activity being outside the factory, Modvat credit cannot be extended to mining activity. In this regard, the Commissioner (Appeals) has relied on the Larger Bench judgment of 5-Members rendered in the case of M/s. Jaypee Rewa Cement, Rewa Vs. CCE Raipur [2000 (38) RLT 1111 (CEGAT-L.B.)] The relevant paragraph relied by him in para 6 of his order is extracted below:- 6. I find that this issue has been extensively dealt with by the 5 Member Bench of the Hon'ble CEGAT in the case of M/s. Jaypee Rewa Cement, Rewa Vs. CCE, Raipur- (2000 (38) RLT 1111 (CEGAT-I,B)) in which it has been held as under: "The process of manufacture of cement did not extend beyond the bounds of the cement factory as registered with the Central Excise Department under Rule 174 and that the mining activity outside the factory, being an activity for procurement of a raw material (limestone), was only a process anterior to the commencement of the process of manufacture of cement and therefore, did not form part of the manufacture." The Hon'ble CEGAT further held that the explosives used for quarrying limestone in mines situated away from the cement factory cannot be held to be "goods used in or in relation to the manufacture of cement and consequently would not qualify to be "inputs" for the modvat credit under Rule 57A of the Central Excise Rules,1944.

The Commissioner (Appeals) dismissed the appeals as the issue was covered one.

3. Ld. Consultant Shri Chidananda Rao submits that the dismissals of appeals without grant of hearing is violative of principles of natural justice even if the issue was covered by a Larger Bench judgment. He submits that the mining activity was within the factory premises in the case of India Cements, therefore the non grant of opportunity to explain has resulted in denial of principles of natural justice and seeks for remand of the case in respect of India Cements by granting waiver of pre deposit. As against the appellants in Vishnu Cements also, no opportunity of hearing was granted which is again violative of principles of natural justice. He submits that the Tribunal has indeed disposed of the matter finally by the 5-Member judgment referred to but yet their right of hearing ought to have been granted. He also very fairly brings to the notice of this bench the final order No.567-570/2001 dated 25.4.2001 in respect of India Cements and Zuari Cements Ltd. wherein by applying the ratio of the Larger Bench judgment noted supra, the Tribunal dismissed the stay and the final appeal. He had made a submission that the matter was ceased in reference before the High Court of Andhra Pradesh, Madhya Pradesh and Rajasthan and matter could be kept pending. However, the bench did not accept the plea and dismissed the appeals on the ground that the issue was covered by Larger Bench judgment and that of the judgment of this bench in the case of Madras Cements Ltd. [1998 (99) ELT 395]. He submits that opportunity of hearing ought to have been granted to demonstrate that the factory was within the mining area.

4. Ld. S.D.R. submits that there is no dispute about the explosives being used in the mines and the activity is outside the factory and not part of manufacturing activity as has been noted by the Original authority where the appellants had been given full opportunity of hearing. The matter being covered by Larger Bench, the Commissioner was justified in dismissing the appeals applying the ratio of the judgment.

He further submits that all the facts and the reasoning have been gone into in detail by the original authority and there was no dispute about the facts. He submits that in India Cements case, the same submission was made by the Consultant at the time of hearing of the stay but it was not accepted and by Final order No.567-570/2001 dated 25.4.2001.

The appeals of India Cements and that of Zuari Cements Ltd. were dismissed by following the ratio of the above mentioned judgment.

5. On a careful consideration of the submission, we totally agree with the submission of Ld.SDR in the present case. The matters have been finally reached finality by 5-Member Bench of the Tribunal rendered in the case of Jaypee Rewa, Rewa Vs. CCE, Raipur (supra). The Ld.

Consultant had made this very submission in the earlier appeal in the case of India Cements Ltd. where also the Commissioner had dismissed all the appeals by applying the ratio of the Larger Bench judgment. The Tribunal in para 4 have clearly recorded that appellants have not shown that the explosives were used within the factory and the fact of the explosive being used in the mine is an admitted one. The findings recorded in para 4 is noted below:- 4. On a careful consideration of the submission, we totally agree with the Ld. DR that the issue is fully decided by the Tribunal judgments of Larger Bench. In this particular case, the explosives have been used in mines located outside the factory. Once an item has been used outside the factory, consistently the Tribunal has taken a view that the assessee cannot claim the benefit of Modvat credit. The Order-in-Original of the Assistant Commissioner also noted large number of judgments in this regard which are all in favour of the Revenue. At this stage, Ld. Consultant interrupts and submits that the mines were all located inside the factory. We are not in a position to appreciate this interruption and also we notice that this issue was not the point raised before either of the authorities. No documents have been produced. Neither approved plan has been produced to show that the mines were located inside the factory. Mines are governed by the Mines Act whereas the factories are registered under the Factories Act. The submissions made is totally unsustainable, as their submissions were duly considered by the Commissioner and by following the Larger Bench judgment he rejected the appeals. Hence, there cannot be any doubt in the matter that the explosives were used in mines located outside the factory and the Larger Bench judgment is binding on Co-ordinate benches.

Therefore, by rejecting the stay applications, the appeals are taken up and respectfully following the ratio of the Tribunal, all the four appeals are dismissed.

The ratio of the Larger Bench judgment (supra) and that of the Madras Cements Ltd. (supra) and also that of India Cements Ltd. by Final order No.567-570/2001 applies to the facts of the present case and therefore, by applying the ratio thereof, the stay applications and appeals are dismissed.

6. In the case of My Home Cement Industries Ltd., Ld. Advocate shri V.J. Sankaram has sent a request for adjournment. We are not inclined to grant any adjournment as the issue is totally covered and no useful purpose will be served by adjourning the matter. The Larger Bench judgment of 5 Members in the case of Jaypee Rewa Cements, Rewa (supra) and other cited judgments clearly applies to the facts of the case and this bench is bound by these judgments in terms of judicial discipline.

7. The plea taken by Ld. Consultant that the matter is ceased in Reference is not pertinent to the issue because there is no stay of the operation of the Larger Bench judgment of the Tribunal. The appellants are at liberty to file Reference application before the concerned High Courts to agitate the issue. In so far as the Tribunal is concerned, the issue has reached finality and therefore, the appeals of My Home Cement Industries Ltd. are also dismissed following the ratio of the judgment cited supra.