Cenvat credit on explosives used in limestone mining upheld as inputs linked to manufacture beyond factory premises

Cenvat credit on explosives used outside the factory for mining limestone, later consumed in cement manufacture, was held admissible. The Court treated the definition of "input" under Rule 2(f) of the Cenvat Credit Rules, 2001 as pari materia with Rule 57-AA(d) of the Central Excise Rules, 1944, and applied the settled principle that inputs used in relation to manufacture are not confined to goods physically used within the factory premises. It further noted that later binding Supreme Court precedent had affirmed the material similarity of the MODVAT and CENVAT schemes for this purpose, rendering the contrary view no longer good law.

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Issues: Whether credit on explosives used outside the factory premises for mining limestone, which was then used in manufacture of cement, was admissible under the Cenvat/Modvat scheme.

Analysis: The definition of "input" under Rule 2(f) of the Cenvat Credit Rules, 2001 was treated as pari materia with Rule 57-AA(d) of the Central Excise Rules, 1944. The Court relied on the settled position that inputs used in relation to manufacture are not confined to goods physically used within the factory premises. It also noted that the Supreme Court had affirmed in later binding precedent that the MODVAT and CENVAT schemes are materially the same for this purpose, and that the contrary view was not good law.

Conclusion: Credit on the explosives was admissible, and the substantial question of law was no longer res integra. The appeal was dismissed.

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