KIRPAL, J.


CAs Nos. 5340-41 of 2000


The appellants M/s. Jaypee Rewa Cement are manufacturers of cement in their factory at Raipur. Limestone is an essential raw material for the said manufacture, but in order to extract limestone, explosives are used for mining the same.


It is not in dispute that the explosives which are used are items falling under Chapter 36 of the Excise Tariff. On the said explosives, excise duty had been paid, but the limestone which was extracted, though an excisable item, was exempt from payment of excise duty by reason of an exemption notification. In the manufacture of cement, the appellants claimed MODVAT credit in view of the provisions of Rule 57-A of the Central Excise Rules.


The case of the appellants was that the explosives used in the 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 Rule. The Excise Authorities as well as CEGAT did not accept the contention of the appellants. The Tribunal came to the conclusion that Rule 57-F was applicable in this case as explosives had not been brought into the factory and they had been used at a place away from the cement factory. It was of the opinion that by virtue of the said provision, Rule 57-A cannot be extended to take in within its ambit any goods used outside the factory for production of the final product.


Rule 57-A with which we are concerned in this case reads as follows :



"57-A. Applicability. for the (1) The provisions of this section shall apply to such finished excisable goods (hereinafter referred to as the 'final products'), as the Central Government may, by notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereinafter referred to as the 'specified duty') paid on the goods used in or in relation to the manufacture of the said final products (whether directly or indirectly and whether contained in the final product or not) (hereinafter referred to as the 'inputs') and for utilising the credit so allowed towards payment of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the said notification, subject to the provisions of this section and the conditions and restrictions that may be specified in the notification :Provided that the Central Government may specify the goods or classes of goods in respect of which the credit of specified duty may be restricted.


Explanation. - For the purposes of this Rule, 'inputs' includes -


(a) inputs which are manufactured and used within the factory of production, in or in relation to, the manufacture of final products,


(b) paints and packaging materials,


(c) inputs used as fuel,


(d) inputs used for generation of electricity, used within the factory of production for manufacture of final products or for any other purpose, and


(e) accessories of the final product cleared along with such final product, the value of which is included in the assessable value of the final product,


but does not include -


(i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products;


(ii) packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is being availed of for packaging any final products;


(iii) packaging materials or containers, the cost of which is not included in the assessable value of the final products under Section 4 of the Act; and


(iv) crates and glass bottles used for aerated waters." *


The other Rules which are relevant are Rule 57-C which provides that credit for duty is not to be allowed if final products are exempt and Rule 57-D provides for credit of duty not being denied or varied in certain circumstances. Rule 57-F, on which reliance is placed by the Tribunal and also by Mr. Kailash Vasdev, learned Senior Counsel appearing for the Revenue, reads as follows :

"57-F. Manner of utilisation of the inputs and the credit allowed in respect of duty paid thereon. - (1) The inputs in respect of which a credit of duty has been allowed under Rule 57-A -


(i) may be used in, or in relation to, the manufacture of final products for which such inputs have been brought into the factory; or


(ii) shall be removed, after intimating the Assistant Commissioner of Central Excise having jurisdiction over factory and obtaining a dated acknowledgement of the same, from the factory for home consumption or for export under bond :


Provided that where the inputs are removed from the factory for home consumption on payment of duty of excise, such duty of excise shall be the amount of credit that has been availed in respect of such inputs under Rule 57-A.


(2) Notwithstanding anything contained in sub-rule (1), a manufacturer may after intimating, the Assistant Commissioner of Central Excise having jurisdiction over the factory and obtaining dated acknowledgement of the same, remove the inputs as such, or after the inputs have been partially processed during the course of manufacture of final products, to a place outside the factory, -


(a) for the purposes of test, repairs, refining, reconditioning or carrying out any other operation necessary for the manufacture of the final products and return the same to his factory, for -


(i) further use in the manufacture of the final product; or


(ii) removing the same without payment of duty under bond for export; or


(iii) removing the same after payment of duty for home consumption :


Provided that the waste, if any, arising in the course of such operation is also returned to the said factory;


(b) for the purposes of manufacture of intermediate products necessary for the manufacture of the final products and return the said intermediate products to his factory, for, -(i) further use in the manufacture of the final product; or


(ii) removing the same without payment of duty under bond for export; or


(iii) removing the same after payment of duty for home consumption :


Provided that the waste, if any, arising in the course of such operation is also returned to the said factory :


Provided further that the said waste need not be returned to the said factory after the appropriate duty of excise leviable thereon has been paid." *


The other Rule which is relevant is Rule 57-J which reads as follows :



"57-J. Credit of duty in respect of inputs used in an intermediate product. - Notwithstanding anything contained in these Rules, the Central Government may, by notification in the Official Gazette, specify the inputs used in the manufacture of intermediate products received by a manufacturer for use in or in relation to the manufacture of final products, in respect of which the specified duty paid on the said inputs shall, subject to the conditions and restrictions that may be specified in the notification, be allowed as credit under Rule 57-A." *


As has already been observed, notification under Rule 57-A was issued by the Central Government on 1-3-1994 specifying the final product described in the Table annexed thereto in respect of which duty paid on inputs was to be allowed as credit. The said Table is as follows :


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"S. Description of inputs Description of final products No. -------------------------------------------------------------------------- (1) (2) (3) -------------------------------------------------------------------------- 1. All goods falling within the All goods falling within the Schedule to the Central Excise Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), Tariff Act, 1985 (5 of 1986), other than the following, other than the following, namely, - namely, -(i) goods classifiable under (i) goods classifiable under any heading of Chapter 24 of any heading of Chapter 24 the Schedule to the said Act; of the Schedule to the said Act;


(ii) goods classifiable under (ii) goods classifiable under Heading 36.05 or 37.06 of the Heading 36.05 or 37.06 of the Schedule to the said Act; Schedule to the said Act;


(iii) goods classifiable under (iii) woven fabrics classifiable Sub-Heading 2710.11, 2710.12, under Chapter 52 or Chapter 54 or 2710.13 or 2710.19 (except Chapter 55 of the Schedule to the natural gasoline liquid) of said Act. the Schedule to the said Act;


(iv) high-speed diesel oil classifiable under Heading 27.10 of the Schedule to the said Act." *


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It is not in dispute that explosives fall under Chapter 36. The particular items used by the appellants come under Headings 36.01, 36.02 and 36.03. Therefore, the said inputs, namely, the explosives would fall under column (2) of the aforesaid Table while cement comes under Chapter 25 and would be a final product falling under column (3) of the aforesaid Table. Therefore, both explosives as well as cement fall under column (2) and column (3) respectively of the aforesaid Table.


The question which, however, arises for consideration is whether it is necessary for the explosives to be used within the factory premises where the manufacture of cement takes place.


Reading of Rule 57-A 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 57-A. Sub-rule (1) of Rule 57-A does not, in any way, specify that the inputs have to be utilised within the factory premises. The Explanation contained in Rule 57-A 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 57-A require the inputs to be brought into the factory premises at any point of time.The appellants could not have claimed for MODVAT credit in respect of limestone because of the provisions of Rule 57-C, inasmuch as there was an exemption from levy of excise duty in respect thereof. There was an exemption for a certain period and for the rest of the period the tariff itself provided that there will be nil rate of duty on the limestone which is extracted.


As we have already noticed, the Tribunal has relied upon Rule 57-F in coming to the conclusion that the inputs in respect of which a credit of duty is claimed must be those which are used in or brought into the factory premises. The Tribunal, however, has not referred to the provisions of Rule 57-J, the opening portion of which makes it clear that the said Rule will be applicable notwithstanding anything contained in the other Rules. According to Rule 57-J, when the Central Government by notification specified the inputs used in the manufacture of intermediate products received by the manufacturer for use in or in relation to the manufacture of final product, then all such products on which duty has been paid credit will be allowed. Pursuant to this Rule 57-J, notification was issued on 20-6-1986 which was amended from time to time. The relevant part of the notification is as follows :


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"S. Description of inputs Description of Description of final No. intermediate products products -------------------------------------------------------------------------------------- (1) (2) (3) (4) -------------------------------------------------------------------------------------- 1. All goods falling All goods falling within All goods falling within within the Schedule to the Schedule to the the Schedule to the the Central Excise Central Excise Tariff Central Excise Tariff Act, Tariff Act, 1985 (5 of Act, 1985 (5 of 1986), 1985 (5 of 1986), other 1986), other than the other than the following, than the following, following, namely, - namely, - namely, -(i) goods classifiable (i) goods classifiable (i) goods classifiable under any heading of under any heading of under any heading of Chapter 24 of the Chapter 24 of the Chapter 24 of the Schedule to the said Schedule to the said Schedule to the said Act; Act; Act;


(ii) goods classifiable (ii) goods classifiable (ii) goods classifiable under Heading 36.05 or under Heading 36.05 or under Heading 36.05 or 37.06 of the Schedule to 37.06 of the Schedule 37.06 of the Schedule to the said Act; to the said Act; the said Act;


(iii) goods classifiable (iii) goods classifiable (iii) woven fabrics under Sub-Heading under Sub-Heading classifiable under 2710.11, 2710.12, 2710.11, 2710.12, Chapter 52 or Chapter 2710.13 or 2710.19 2710.13 or 2710.19 54 or Chapter 55 of the (except natural gasoline (except natural gasoline Schedule to the said Act. liquid) of the Schedule liquid) of the Schedule to the said Act; to the said Act;


(iv) high-speed diesel (iv) high-speed diesel oil classifiable under oil classifiable under Heading 27.10 of the Heading 27.10 of the Schedule to the said Schedule to the said Act. Act." *


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Explosives would fall under column (2) being a tariff item in Chapter 36; the intermediate product, namely, limestone would fall under column (3) being covered by Chapter 25; and the final product, namely, cement would also fall under Chapter 25 and would fall under column (4). The reading of Rule 57-J along with the aforesaid notification can leave no manner of doubt 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. 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 cement.We are, therefore, in agreement with the learned counsel for the appellants that the wide language used in Rule 57-A entitles the appellants to claim the benefit when the said Rule is read along with Rule 57-J.


For the aforesaid reasons, these appeals are allowed and the judgment of the Tribunal is set aside.


CAs Nos. 6932, 6900-05, 7131-32, 7337-40, 7195-7200 of 2000, 2301, 2515, 3992, 3994-95, 4383, 4784 and 2577 of 2001


The principle involved in these cases is similar to that in the case of Jaypee Rewa Cement. For the reasons stated therein, these appeals are also allowed.


CA No. 6064 of 2001 @ SLP (C) No. 20785 of 2000

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