2002 (1) TMI 70 - HC - Central Excise

Dispute over mining explosives eligibility for exemption under Notification No. 191/87 upheld by Tribunal

The case involved a dispute over the eligibility of explosives used in mining operations for exemption under Notification No. 191/87. The company, engaged ... Explosives Issues:1. Interpretation of Notification No. 191/87 regarding exemption eligibility for explosives used in mining operations.2. Determination of whether explosives used in blasting mines for obtaining ores are eligible for exemption under the said notification.Analysis:1. The case involved a reference petition under Section 35H(1) of the Central Excise Act, 1944, where the department sought a reference regarding the eligibility of explosives used in mining operations for exemption under Notification No. 191/87. The key question was whether the explosives used for blasting mines to obtain Zinc and Lead ores were covered under the exemption criteria of the notification.2. The respondent, a public undertaking mining Zinc and Lead ores, had been granted a license under Notification No. 191/87 for duty-free procurement of goods for use in manufacturing Zinc and Lead concentrates. The dispute arose when the Assistant Collector denied the issuance of CT-2 certificates for explosives used in mining operations, stating they were not part of the manufacturing process. The company argued that ore extraction was an integral part of the manufacturing process of Zinc concentrates, thus qualifying for the exemption.3. The Commissioner of Customs (Appeals) ruled in favor of the company, citing the interdependence of mining and manufacturing processes based on a Supreme Court decision. The Commissioner held that the explosives used in mining operations were indeed part of the manufacturing process of Zinc concentrates, satisfying the conditions of Notification No. 191/87. The department's appeal against this decision was rejected by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) in 2000.4. During the hearing, the department argued that the explosives used in mining did not constitute manufacturing of Zinc and Lead but only facilitated ore extraction. Reference was made to a previous judgment concerning mining activities not being considered manufacturing processes. However, this argument was countered by citing a Supreme Court decision that allowed credit for duty paid on inputs used in intermediate products, supporting the view that explosives used in mining could be considered part of the manufacturing process.5. The Tribunal dismissed the reference petition, stating that no referable question of law arose from its order dated 6-12-2000. The decision reaffirmed that the explosives used in mining operations for obtaining Zinc and Lead ores could be treated as part of the manufacturing process for Zinc concentrates, aligning with the conditions of Notification No. 191/87.6. The case references various legal precedents to establish the interdependence of mining and manufacturing processes, emphasizing that ore extraction is an essential and integrated part of manufacturing Zinc and Lead concentrates. The judgment highlights the importance of considering the entire process chain, from mining to final product, in determining the eligibility for duty exemptions under relevant notifications.