Modvat credit on explosives used in off-factory mines denied because preparatory mining activity was not input use in manufacture.

Modvat credit on explosives used to excavate limestone in mines outside the registered factory premises was held inadmissible. The activity in the mines was only preparatory to cement manufacture, and goods used outside the factory for procuring raw material did not qualify as inputs used in or in relation to manufacture under the binding Larger Bench view. Credit was therefore denied, the issue was decided against the assessee and in favour of the Revenue, and the appeals were dismissed.

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Issues: Whether Modvat credit was admissible on explosives used for excavating limestone in mines situated outside the factory.

Analysis: The explosives were used in mines located outside the registered factory premises and the mining activity was only preparatory to the manufacture of cement. Following the binding Larger Bench view, goods used outside the factory for procurement of raw material do not qualify as inputs used in or in relation to manufacture for the purpose of Modvat credit.

Conclusion: Modvat credit was not admissible. The issue was decided against the assessee and in favour of the Revenue, and the appeals were dismissed.

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