2019 (1) TMI 902 - AT - Central Excise

Cement used in mines qualifies as 'input' under Cenvat Credit Rules

HINDUSTAN ZINC LTD Versus C.G.S.T.,C.C & C. E-JODHPUR

The Tribunal concluded that the cement used in mines for filling pits after ore extraction qualifies as an 'input' under Rule 2(k) of the Cenvat Credit ... CENVAT Credit - inputs - cement used in mine for filling the pits after extraction of ore - denial of credit on the ground that there is no relation with the manufacture or clearance of the final product - Held that:- Perusal of record shows that there has been a permission under the aforesaid regulation in favour of the appellant vide which the appellant was permitted to conduct stopping operations of the ore block by making use of impugned cement and the method of extraction shall be by VRM Stopping method post filled by mill failing mixed with cement in the ratio as prescribed therein. The permission specifically recites that extraction of ore from the proposed area shall be commenced only after proper settlement and consolidation of the fill of stopped out ore block, immediately below the proposed ore block. Perusal of these clauses in the permission by the mines department in favour of the appellant makes it abundantly clear that filling of the open ore pits with cement was a mandatory prerequisite for the appellant to extract ore - the cement used herein is something which has relation, though indirectly, with the extraction of ore thus it qualifies for input as defined under Rule 2(k), prevailing during the relevant period. Without filling of the ore pits the appellant was statutorily, not in position to extract the ore, i.e. the final product thus, the use of cement was very much in relation to the manufacture, which was extraction of ore - the appellant is entitled to treat the same as input. Thus, the adjudicating authority below has committed an error while denying the credit on cement used by appellant in filling pits for making area fit for ore extraction - credit allowed - appeal allowed - decided in favor of appellant. Issues Involved:1. Admissibility of Cenvat credit on cement used in mines for filling pits after ore extraction.2. Interpretation of 'input' under Rule 2(k) of the Cenvat Credit Rules, 2004.3. Compliance with statutory requirements under the Metalliferous Mines Regulations Act, 1961.4. Applicability of previous judgments and circulars to the current case.Detailed Analysis:Admissibility of Cenvat Credit on Cement Used in Mines:The primary issue was whether the cement used in mines for filling pits after ore extraction qualifies as an 'input' under Rule 2(k) of the Cenvat Credit Rules, 2004. The Show Cause Notices (SCNs) issued to the appellant alleged that the cement used in this manner had no relation to the manufacture or clearance of the final product, thus making the Cenvat credit on cement inadmissible. The appellant contested this, citing previous favorable judgments in its own case and other similar cases.Interpretation of 'Input' under Rule 2(k):The Tribunal examined the definition of 'input' under Rule 2(k) of the Cenvat Credit Rules, 2004. According to Section 2(k), 'input' includes all goods used in the factory by the manufacturer of the final product, among other criteria. The Tribunal noted that the department relied on clause 2(k)(iv)(F), which excludes goods that have no relationship whatsoever with the manufacture of the final product. The Tribunal needed to determine whether the cement used in filling pits had any relation to the manufacture of the final product, which in this case is ore extraction.Compliance with Statutory Requirements:The Tribunal referred to the Metalliferous Mines Regulations Act, 1961, specifically Regulation 107(3), which mandates the use of cement for filling pits as a prerequisite for ore extraction. The Tribunal found that the appellant had obtained the necessary permissions under this regulation, which required the use of cement for safe and effective ore extraction. This statutory requirement made it clear that the use of cement was integrally connected to the extraction process.Applicability of Previous Judgments and Circulars:The Tribunal cited several previous judgments to support its decision. In the case of Prism Cement Ltd. v. CCE & ST, Jabalpur, the Tribunal had held that cement used in mines for filling pits qualifies as an 'input' under Rule 2(k). Similarly, in the appellant's own previous cases, the Tribunal had ruled in favor of allowing Cenvat credit for such use of cement. The Tribunal also referred to the Supreme Court's decision in JK Cottons Spinning and Weaving Mills Co. Ltd. Vs. Sales Tax Officer, Kanpur, which held that processes integrally connected with the manufacture of goods should be considered part of the manufacturing process.The Tribunal also examined Circular No. 943/4/2011-CX dated 29.04.2011, which clarified that the expression 'no relationship whatsoever with the manufacture of a final product' should be interpreted strictly. The circular stated that goods used in the factory, even indirectly, should qualify for Cenvat credit unless explicitly excluded.Conclusion:The Tribunal concluded that the cement used by the appellant for filling pits in the mining area was indeed related to the manufacture of the final product (ore extraction). Therefore, it qualified as an 'input' under Rule 2(k) of the Cenvat Credit Rules, 2004. The Tribunal set aside the impugned order and allowed the appeals, thereby granting the appellant the benefit of Cenvat credit on the cement used.Operative Part:The Tribunal pronounced the operative part of the judgment in the open court, setting aside the impugned order and allowing both appeals.