Aditya Cement and ors. Vs. Union of India (Uoi) and ors. - Court Judgment

Mathur, J.

1. This Reference Application under Section 35H of the Centra! Excise Act, 19-14 is made by the M/s. Aditya Cement, a Unit of Grasim Industries Limited seeking questions of law as framed in para 14-E arising out of the order dated 21.5.2001 passed by the Customs, Excise & Gold (Control) Appellate Tribunal, hereinafter referred to as 'CEGAT'.

2. At the outset, it is submitted by the learned counsel for the applicant as well as the learned counsel for the department that the question of law, which is sought to be called for reference for the Tribunal has been answered by the Apex Court in Jaypee Rewa Cement v. Commissioner of Central Excise (1). Though it is agreed by both the learned counsel for the parties that the question involved has been settled by the Apex Court and, as such, the Reference can be straightway answered but the requirement of law is that this court will have to first call the statement of case from the Tribunal and refer the question of law. Thus, this Court is to wait for the of the Act. Thus, the question arises for consideration is as to whether in a case where the facts, as revealed from the orders, are only facts on which the answer of question of law depends and is settled by the highest court of the Country, would it still be advisable to undertake the exercise of calling the reference? Section 35H of the Central Excise Act, 1944 reads as follows :

'Section 35H, Application to High Court.-(1) The Commissioner of Central Excise or the other party may, within one hundred and eighty days of the date upon which he is served with notice of an order under Section 35C passed on or after the 1st day of July, 1999 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of exercise or to the value of goods for purposes of assessment), by application in the prescribed form, accompanied, where the application is made by the other party, by a fee of two hundred rupees, apply to the High Court to direct the Appellate Tribunal to refer to the High Court any question of law arising from such order of the Tribunal.

(2) The Commissioner of Central Excise or the other party applying to the High Court under Sub-section (1) shall clearly state the question of law which he seeks to be referred to the High Court and shall also specify the paragraph in the order of the Appellate Tribunal relevant to the question sought to be referred.

(3) On receipt of notice that an application has been made under Sub-section (1), the person against whom such an application hasbeen made', may, notwithstanding that he may not have filed such application, file, within forty-five days of the receipt of the notice, a memorandum of cross-objections verified in the prescribed manner against any party of the order in relation to which an application for reference has been made and such memorandum shall be disposed of by the High Court as if it were an application presented within the time specified in Sub- section (1).

(4) If, on an application made under Sub-section (1), the High Court directs the Appellate Tribunal to refer the question of law raised in the application, the Appellate Tribunal shall, within one hundred and twenty days of the receipt of such direction, draw up a statement of the case and refer it to the High Court.'

3. Dealing with the identical provisions under Section 24(2)(b) of the Orissa Sales Tax Act, 1947 in State of Orissa v. Mahabir Prasad Agrawalla (2), the Orissa High Court held that no purpose would be served by calling the statement of case and held that in such a circumstances, it would be a futile exercise to call-for the reference. The Court observed thus-

'Where the facts as revealed from the orders are the only facts on which answer to question of law depends, it would be a futile exercise to comply with requirement of Statute only without any purpose.'

4. The Delhi High Court in C.I.T. v. Maharishi Ved Vigyan Vishwa Vidya Peetham (3) dealing with the provisions of Section 256 of the Income Tax Act, held that when the facts are not disputed or the facts as found by the Tribunal and contained in its appellate order, are enough to enable the question of law arising therefrom being appreciated and answered by the High Court, the High Court, instead of issuing a mandamus to the Tribunal and directing a statement of case to be drawn up and sent to the High Court, may straightway proceed to answer the question. The Court observed thus -

'However, it is not difficult to comprehend cases where the question of law is a pure question of law and the facts found by the Tribunal are such as are either not disputed or need hardly any restatement over and above what is already contained in the order of the Tribunal. In such a case should the High Court necessarily perform the ritual of first directing the Tribunal to state the case which would be an exercise in futility, as the Tribunal would do nothing beyond what it has already done and on receipt of the statement of case, the High Court would answer the question which it could have very easily and comfortably done even at the earlier stage. The only difference would be that, in between, a good number of years would have been wasted and a good number of assessment cases raising a similar issue would go on piling up awaiting the decision of the High Court on the question of law lying under reference. All this would mean needless wastage of public time, money and energy. Such unnecessary and cumbersome part of the procedure can be dispensed with by treating it as directory merely.'

5. The Delhi High Court did not agree with the view of the Kerala High Court in C.I.T. v. Wandoor Jupiter Chits (P.) Ltd. (4). In the said case, the Court termed the procedure prescribed under Section 256(2) as an archaic procedure but being bound by the phraseology of the provision felt helpless in making the departure from the procedure. With utmost respect, we are unable to agree with the view expressed by the Kerala High Court. In our view, the jurisdiction conferred on the High Court under Section 35H is an extra ordinary jurisdiction, which is neither an original jurisdictionnor an appellate one. The scope of hearing is confined to the aspects of law and law only. Thus, where the meaning is clear and requires no further facts than are available in the order under examination, no statement need be called for to consider whether the refusal was justified since it can be disposed of finally without calling for the statement of the case, Calling a reference would mean needless wastage of time, money and energy. To go with unnecessary and cumbersome part of the procedure would be a futile exercise. This would defeat the public policy of early disposal. Therefore, in a given case, where this Court is satisfied that no useful purpose will be served except comply with the requirement of the provisions of statute and parties would not be prejudiced, it is desirable to dispense-with the statutory requirement of calling the statement of case and to refer the questions of law arising out from the order of the Tribunal.

6. In the instant case, both the learned counsel for the parties do not dispute the facts and the fact that the controversy involved is settled by the decision of the Apex Court in M/s Jaypee Rewa Cement's case (supra). Hence, we dispense with the requirement of calling the statement of fact and proceed to decide the following question of law :

'i. Whether explosives used in mines for obtaining limestone which is then used in the factory for the manufacture of cement can be considered as input eligible for Modvat credit in terms of Rule 57-H of the Central Excise Rules, 1944?

ii. Whether the impugned judgment of the Tribunal dated 21.5.2001 is liable to be set aside in view of the judgment of apex court rendered in Jay Pee Rewa's case (supra)?

iii. Whether the Tribunal was right in holding that explosives could not be considered as input because they were used in a place away from factory?

iv. Whether the use of explosives in captive mines for obtaining limestone, an intermediate product, which is then used for manufacturing cement can be considered to be a process in the manufacture of final goods?

v. Whether the process of mining limestone in captive mines undertaken by cement factory can be considered as integral to the process of manufacture of cement, more particularly in view of the fact that mining area lying adjacent to the cement factory area is also nothing but a part of factory area?

vi. Whether the activity of mining limestone is integral to the manufacture of cement in the case of the petitioner?

vii. Whether in the facts and circumstances of the case the mining area can be called as a 'factory within the meaning of Section 2(e) of the Central Excise Act, 1944?'

7. The petitioner Unit is engaged in the business of manufacturing cement falling under Chapter 25 of the Central Excise Tariff Act, 1985. The manufacturing of cement is a continuous integrated process commencing with the extraction of limestone from mines, crushing of limestone subjecting it to various manufacture/processes by which the same is converted into clinker, pulverising/grinding such clinker and mixing the same with gypsum to manufacture cement. Since the process is an integrated one, each one of the inputs/goods/items that contribute to the various processes are to be considered as contributing to the producing or processing of cement. The petitioner used duty paid explosives namely Grilled Ammonium Nitrate, Detonator, Cordtex Fuse, Booster & Primex in blasting operations for producing limestone in its captive mines and claimed modvat credit of the duty paid thereonunder Rule 57-A of the Rules. The Tribunal decided the appeal against the petitioner assessee in view of the larger bench decision of the Tribunal in the case of M/s. Jaypee Rewa Cement's case (supra). The said decision has been reserved by the Apex Court in M/s. Jaypee Rewa Cement's case (supra). The Apex Court considering the Rule 57-A (1) of the Central Excise Rules, found that the said rule does not in any way specify that the inputs have to be utilised within the factory premises. Dealing with Rule 57-J, the Court expressed that even in respect of the 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 duly paid in respect of the input. The Court concluded that -

'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 limestone which, in turn, was used for the manufacture of cernent.'

8. Consequently, following the decision of the Apex Court in M/s. Jaypee Rewa Cement's case (supra), the reference is answered in favour of the petitioner assessee and against the Department. A copy of this order may be sent to the CEGAT.