Cenvat credit on cement used for mine-pit filling allowed because it was a mandatory pre-condition for ore extraction.

Cement used to fill mine pits before ore extraction was treated as an input eligible for Cenvat credit because the activity was a mandatory pre-condition under mining regulations and had an indirect but necessary nexus with extraction, which was the relevant manufacturing activity. The exclusion in Rule 2(k) for goods having no relationship whatsoever with manufacture was construed strictly, so cement did not fall within it. Earlier decisions relied on by the department were found inapplicable to the post-amendment position, and the clarificatory circular supported the assessee's claim. Credit was therefore allowed and the denial was set aside.

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Issues: Whether cement used for filling mine pits before ore extraction was an eligible input for Cenvat credit under Rule 2(k) of the Cenvat Credit Rules, 2004.

Analysis: The cement was used in compliance with mining regulations and as a mandatory pre-condition for commencing extraction of ore. Regulation 107(3) of the Metalliferous Mines Regulations, 1961 required the prescribed stoping operations, and the record showed that the fill using cement was necessary before extraction could begin. Goods used in the factory are eligible unless specifically excluded, and the expression excluding goods having no relationship whatsoever with manufacture must be construed strictly. The cement, though not directly forming part of the final product, had an indirect and necessary nexus with extraction of ore, which was the manufacturing activity in the present case. The departmental reliance on earlier decisions was held inapplicable to the post-amendment position, and the circular clarifying that only goods having absolutely no relationship with manufacture are excluded supported the assessee's case.

Conclusion: The cement used for filling mine pits was held to be an input eligible for Cenvat credit, and the denial of credit was set aside in favour of the assessee.

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