MODVAT credit on explosives used in limestone mining is available where the mineral is an intermediate product in cement manufacture.

Explosives used for blasting limestone in mining qualify as inputs for MODVAT credit under Rule 57A because the rule covers goods used in or in relation to manufacture, and the explanation broadens "inputs" beyond goods used only inside the factory. Read with Rule 57J, duty-paid inputs used to produce an intermediate product remain creditable where that intermediate product is used in making the final product. On that basis, explosives used in mining limestone, an intermediate product in cement manufacture, are eligible for credit.

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Issues: Whether explosives used in mines for blasting limestone can be treated as inputs eligible for MODVAT credit under Rule 57A of the Central Excise Rules, 1944.

Analysis: The applicable scheme under Rule 57A permits credit for goods used in or in relation to the manufacture of final products, and the explanation enlarges the meaning of "inputs" rather than confining them to goods used only inside the factory. Reading Rule 57A with Rule 57J, duty paid inputs used in the manufacture of an intermediate product are creditable where that intermediate product is used for making the final product. The explosives were duty paid and were used for mining limestone, which was an intermediate product used in the manufacture of cement. The question had already been answered by the Supreme Court in favour of allowing credit in such circumstances.

Conclusion: Explosives used in mining limestone are inputs eligible for MODVAT credit under Rule 57A of the Central Excise Rules, 1944, and the reference is answered in favour of the assessee.

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