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Issues: (i) whether Modvat credit was admissible on high explosives used in mining operations for blasting limestone used in the manufacture of cement; (ii) whether Modvat credit was admissible on grinding media used in coal mills in relation to the manufacture of cement; (iii) whether lignite and lining matter could be treated as inputs used in the manufacture of cement.
Issue (i): whether Modvat credit was admissible on high explosives used in mining operations for blasting limestone used in the manufacture of cement.
Analysis: The question turned on the scope of the expression "used in relation to the manufacture" and on conflicting Tribunal views regarding explosives used in quarrying operations for obtaining limestone that is ultimately used in cement manufacture. In light of those conflicting decisions, the matter required resolution by a larger Bench.
Conclusion: The question was referred to the Hon'ble President for decision by a larger Bench.
Issue (ii): whether Modvat credit was admissible on grinding media used in coal mills in relation to the manufacture of cement.
Analysis: The record noted prior Tribunal decisions taking the view that grinding media constituted an input used in relation to cement manufacture, while another Bench had taken the opposite view and denied Modvat benefit under Rule 57A of the Central Excise Rules, 1944. Because of the conflict, the issue was not finally settled by the Division Bench itself.
Conclusion: The question was referred to the Hon'ble President for decision by a larger Bench.
Issue (iii): whether lignite and lining matter could be treated as inputs used in the manufacture of cement.
Analysis: The lining plates and lignite were treated as part of the equipment itself rather than as inputs used in or in relation to the manufacture of cement. On that basis, the view of the lower authority was found to be correct.
Conclusion: The disallowance of Modvat credit on this item was confirmed.
Final Conclusion: The Bench sent the disputed Modvat credit questions on explosives and grinding media for larger Bench consideration, while upholding the denial of credit on lignite and lining matter.
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