- (1.) These appeals by special leave have been preferred by the Commissioner of Central Excise, Jaipur II, against the judgment and order dated 20-8-2002 of Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (for short CEGAT) by which the appeal preferred by the appellant against the order of Commissioner (Appeals) allowing CENVAT Credit to the respondent M/s. J. K. Udaipur Udyog Ltd., on explosives used in mines was dismissed.
(2.) The assessee carries on the business of manufacturing cement falling under Chapter 25 of the Schedule to the Central Excise Tariff Act, 1985. The assessee has been granted a mining lease by the Government of Rajasthan and the limestone excavated from the mines is used for manufacture of cement. The mining area is at a distance of few kilometers from the plant where the cement is manufactured. Explosives are used for blasting purpose in the mines. During the period April to August 2000, the assessee took CENVAT Credit under Rule 57AB of the Central Excise Rules (for short 'Rules') on the explosives used in mines. The Assistant Commissioner, Central Excise, issued a notice to the assessee on 18-4-2001 on the ground, inter alia, that the explosives used for blasting purpose in the mines had not been used in the factory premises for production or in relation to the manufacture of final product i.e. cement; that as per Rule 57AB, the input must be used within the factory of production and, therefore, the explosives do not qualify to be inputs for the manufacture of excisable goods in terms of the aforesaid rule. The assessee was required to show cause why the aforesaid credit taken by him in contravention of Rule 57AB should not be disallowed and recovered from him under the provisions of Rule 57AH read with S. 11A of the Central Excise Act and further, why penal action should not be taken under Rule 173(Q)(1)(bb). The assessee gave a reply to the notice on the ground, inter alia, that the mining area as well as the cement factory, are not only interdependent, but have a direct nexus with each other; that the mining activity and the manufacturing activity cannot be considered as isolated events as without mining limestone, the cement plant cannot be run and that for all practical purposes the mining area is an extension of the factory area. The Assistant Commissioner, Central Excise, by his order dated 29-8-2001 disallowed the CENVAT Credit taken by the assessee, but did not impose any penalty. The assessee preferred an appeal, which was allowed by the Commissioner (Appeals) on the finding that the explosives are inputs in terms of Rule 57AB and CENVAT Credit was allowed. Feeling aggrieved by the order of the Commissioner (Appeals), the Revenue preferred an appeal before the CEGAT, but the same was dismissed.
(3.) The main question to be considered is whether explosives used in the mines for blasting purpose can be held to be 'inputs' so as to qualify for taking CENVAT Credit under Rule 57 AB. The relevant part of Rule 57AB under which CENVAT Credit can be taken reads as under: "57AB. CENVAT credit - (1) A manufacturer or producer of final products shall be allowed to take credit (hereinafter referred to 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; (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, 2404.99, 5402.20, 5402,32, 5402.42, 5402.43, 5402.52, 5402.62, 8415.00, 8702.10, 8703.90, 8706.21 and 8706.39 of the said First Schedule; (iii) the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978); (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 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. Explanation -................... ...................................... ...................................... Rule 57AC of the Rules deals with Conditions for allowing CENVAT Credit and sub-rule (1) thereof reads as under: "(1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer." Rule 57AA gives the definitions and sub-rule (d) thereof reads as under: (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, 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. Explanation- the high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.";