CENVAT credit on mining explosives denied where goods were used in mines, not in the factory of production.

Explosives used in mines for blasting limestone did not qualify as "inputs" for CENVAT credit because Rule 57AA required goods to be used in or in relation to manufacture, and Rule 57AC contemplated receipt of inputs in the factory of production. The Court held that use in the mines, rather than in the cement factory, failed the statutory test, and the ropeway transport of limestone did not make the mines part of the factory. The earlier MODVAT ruling was inapplicable because the CENVAT scheme omitted the provision that had supported credit there, and the amended intermediate-product rule did not cover the manufacturer's own mining activity. Credit was therefore inadmissible.

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Issues: Whether explosives used in mines for blasting limestone qualify as "inputs" for availing CENVAT credit under Rule 57AB of the Central Excise Rules.

Analysis: Rule 57AA defines "input" to mean goods used in or in relation to manufacture and, materially, goods used for manufacture of final products or for any other purpose within the factory of production. Rule 57AC further indicates that credit is taken on receipt of inputs in the factory. On the admitted facts, the explosives were used in the mines and not in the factory where cement was manufactured, so they did not satisfy the statutory requirement. The earlier decision dealing with MODVAT credit did not govern the present CENVAT scheme because the CENVAT rules omitted the equivalent provision that had supported credit in that earlier context. The mines could not be treated as part of the factory merely because limestone was transported to the plant by ropeway. The amended rule also did not assist the assessee, since the relevant intermediate-product provision contemplated job work by another person and not the manufacturer's own mining activity.

Conclusion: The explosives used in the mines did not qualify as inputs for CENVAT credit under Rule 57AB, and the credit was not admissible.

Final Conclusion: The Revenue's challenge succeeded and the orders allowing CENVAT credit were set aside.

Ratio Decidendi: For CENVAT credit under the applicable rules, the claimed goods must satisfy the statutory definition of "input" and be used within the factory of production unless the scheme itself expressly permits a broader treatment.

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