Cenvat credit on explosives used outside the factory was upheld as part of the manufacturing chain; reference dismissed.

Cenvat credit was treated as available for explosives used outside the factory where the explosives formed part of the manufacturing chain by being used to procure raw material for supply to the factory, and the physical location of use was not ant. The Court rejected any artificial segregation of such use from the manufacturing process, and it relied on binding precedent already covering the issue. As the question was already settled, no meaningful basis existed for seeking a reference under Section 35H(1) of the Central Excise Act, 1944, and the departmental reference was dismissed.

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Issues: Whether explosives used outside the factory premises were eligible for Cenvat credit under Rule 57AA(d) of the Central Excise Rules, 1944, and whether a reference was warranted under Section 35H(1) of the Central Excise Act, 1944.

Analysis: The Court noted that Cenvat credit is available where input or material is used in the manufacturing chain and that, in complex manufacturing operations, the physical location of use cannot always be confined to a narrow factory boundary. It held that explosives used to procure raw material for supply to the factory could not be artificially segregated from the manufacturing process merely because the explosives were used outside the immediate factory premises. The Court also observed that the issue had already been covered by binding precedent, leaving no real basis for seeking a reference on the same question.

Conclusion: The reference was not entertained and was dismissed, with the departmental challenge failing on the question of eligibility of Cenvat credit on the explosives.

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