CENVAT credit on mining inputs and transport lubricants was allowed where use had an inextricable nexus with manufacture.

CENVAT credit was treated as admissible on explosives used in mining and lubricants used for transporting raw materials within the mining area and to the factory, because those activities were held to have a direct and inextricable nexus with manufacture of cement. The reasoning applied the principle that credit is available where input use forms part of the manufacturing chain or supports an intermediate stage leading to the final product. On that basis, the denial of credit was set aside and the assessee was held entitled to the claimed benefit.

---

---

Issues: Whether CENVAT credit was admissible on explosives used in mining and lubricants used for transportation within the mining area and for bringing raw materials to the factory.

Analysis: The input materials were used in the process of extracting limestone and moving raw materials to the factory for manufacture of cement. The reasoning treated the mining activity and the transportation of raw materials as integrally connected with the manufacturing process. The decision relied on the settled principle that credit is available where the input has a direct and inextricable nexus with manufacture, including where it is used in producing an intermediate stage leading to the final product.

Conclusion: CENVAT credit on the explosives and lubricants was admissible and the issue was decided in favour of the assessee.

Final Conclusion: The appeals succeeded and the denial of credit was set aside, leaving the assessee entitled to the benefit claimed.

Ratio Decidendi: CENVAT credit is available on inputs that bear an inextricable and functional nexus with the manufacture of the final product, including inputs used in mining and related transport activities forming part of the manufacturing chain.

---