Modvat credit on mining explosives used to obtain limestone was upheld as an eligible input for cement manufacture.

Explosives used in mines to obtain limestone qualified as inputs for Modvat credit under Rule 57A because the rule does not require the input to be used within the factory premises. Credit was also available where the input was used to produce an intermediate product, and that intermediate product was then used in the manufacture of the final product. As limestone served as the intermediate product in cement manufacture, the credit claim fell within the settled position and was allowed in favour of the assessee.

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Issues: Whether explosives used in mines for obtaining limestone, which is then used in the manufacture of cement, qualify as inputs eligible for Modvat credit under Rule 57A of the Central Excise Rules, 1944.

Analysis: The governing principle applied was that Rule 57A does not require inputs to be used within the factory premises. Credit is also available where the input is used to manufacture an intermediate product, and that intermediate product is then used in the manufacture of the final product. Since the explosives were used for obtaining limestone, which functioned as an intermediate product in the manufacture of cement, the claim for credit was covered by the settled legal position.

Conclusion: The explosives qualified as inputs for Modvat credit, and the question was answered in favour of the assessee.

Ratio Decidendi: Modvat credit is admissible on duty-paid inputs used in the manufacture of an intermediate product, even if the input is not consumed within the factory, where that intermediate product is used in the manufacture of the final product.

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