AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2005 (8) TMI 659
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....ent (final product) was manufactured by the assessee. The assessee replied to each of the above three show cause notices by which it submitted that the substantive definition of "input" as per Clause (d) of Rule 57AA of Central Excise Rules, 1944; Rule 2(f) of the Cenvat Credit Rules, 2001 and Rule 2(g) of Cenvat Credit Rules, 2002 was in pari materia and was not different from the definition of "input" under erstwhile Rules 57A and 57B of Central Excise Rules, 1944. According to the assessee, there was no difference between the Modvat scheme and the Cenvat scheme as far as the substantive definition of "input" was concerned. According to the assessee, the Cenvat scheme was more broad-based as compared to the earlier Modvat scheme. 4. The assessees are engaged in the manufacture of cement and clinker falling under Chapter 25 of Central Excise Tariff Act, 1985. They use explosives, welding electrodes, lubricating oil and crusher for extraction of limestone and crushing in the mines adjacent to the cement factory of the assessees. Being aggrieved by the order dated October 30, 2003 confirming the demand, the assessees preferred appeals to the Commissioner (Appeals). 5. By order dat....
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....ion of a Rule similar to Rule 57J, the ratio of ]aypee Rewa Cement (supra) can have no application here." 9. In this case, we are concerned with the period September, 2001 to October, 2002. 10. The Cenvat scheme which was in operation from 1-3-2002 was governed by Cenvat Credit Rules, 2002 inserted by Notification No.5/2002-C.E. (N.T.), dated 1-3-2002. These rules replaced Cenvat Credit Rules, 2001 which held the field from 1-7-2001 to 28-2-2002. Prior to 1-7-2001, the Cenvat scheme was in vogue from 1-4-2000 to 30-6-2001 and the Modvat scheme was in force from 1-3-1986 to 31-3-2000. 11. The relevant provisions of the Modvat scheme during the period 1-3-1986 to 31-3-2000 were as follows : "AA. CREDIT OF DUTY PAID ON EXCISABLE GOODS USED AS INPUTS: RULE 57A. Applicability. - (1) The provisions of this section shall apply to such finished excisable goods (hereafter, in this section, referred to as the final products) as the Central Government may, by notification in the Official Gazette, specify in this behalf for the purpose of allowing credit of any duty of excise or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the sa....
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....all be deemed to have been paid at such rate or equivalent to such amount as may be specified in the said notification, and allow the credit of such duty in respect of the said inputs at such rate or such amount and subject to such conditions as may be specified in the said notification : Provided that the manufacturer shall take all reasonable steps to ensure that the inputs acquired by him are goods on which the appropriate duty of excise as indicated in the documents accompanying the goods, has been paid under section 3A of the Central Excise Act, 1944 (1 of 1944). RULE 57B : Eligibility of credit of duty on certain inputs. - (1) Notwithstanding anything contained in rule 57A, the manufacturer of final products shall be allowed to take credit of the specified duty paid on the following inputs, used in or in relation to the manufacture of the final products, whether directly or indirectly and whether contained in the final products or not, namely :- (i) inputs which are manufactured and used within the factory of production; (ii) paints; (iii) inputs used as fuel; (iv) inputs used for generation of electricity or steam, used for manufacture of final products or for any othe....
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....r 24 of the Schedule to the said Act; (i) goods classifiable under any heading of Chapter 24 of the Schedule to the said Act; (i) goods classifiable under any heading of Chapter 24 of the Schedule to the said Act; (ii) goods classifiable under heading Nos. 36,05 or 37.06 of the Schedule to the said Act; (ii) goods classifiable under heading Nos. 36.05 or 37.06 of the Schedule to the said Act; (ii) goods classifiable under heading Nos. 36.05 or 37.06 of the Schedule to the said Act; (iii) goods classifiable under sub-beading Nos. 2710.11, 2710.12, 2710.13 or 2710.19 (except Natural gasoline liquid) of the Schedule to the said Act; (iii) goods classifiable under sub-heading Nos. 2710.11, 2710.12, 2710.13 or 2710.19 (except Natural gasoline liquid) of the Schedule to the said Act; (iii) fabrics of cotton or man-made fibres failing within Chapter 52, Chapter 54 or Chapter 55 of the Schedule to the Act; (iv) high speed diesel oil classifiable under heading No. 27.10 of the Schedule to the said Act. (iv) high speed diesel oil classifiable under heading No. 27.10 of the Schedule to the said Act. (iv) fabrics of cotton or man-made fibres falling within heading Nos. 58.01, 58.02,....
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....under heading Nos. 84.07 or 34.08 and of a kind used in motor vehicles, compressors falling under heading Wo. 84.14 and of a kind used in refrigerating and air-conditioning appliances and machinery, heading or sub-heading Nos. 84.15, 85.18, 8422.10, 8424.10, fire extinguishers falling under sub-heading No. 8424.80, 8424.91, 8424.99, 84.29 to 84.37, 84.40, 84.50, 84.52, 84.69 to 84.73, 84.76, 84.78, expansion valves and solenoid valves falling under sub-heading Nos. 8481.10 of a kind used for refrigerating and air-conditioning appliances and machinery. 3. All goods falling under chapter 85 (other than those falling under heading Nos. 85.09 to 85.13, 85.16 to 85.31, 85.39 and 85.40); 4. All goods falling under heading Nos. 90.11 to 90.13, 90.16, 90.17, 90.22 (other than for medical use), 90.24 to 90.31 and 90.32 (other than of a kind used for refrigeration and airconditioning appliances and machinery); 5. Components, spares and accessories of the goods specified against S. Nos. 1 to 4 above; 6. Moulds and dies; 7. Refractories and refractory materials; 8. Tubes and pipes and fittings thereof, used in the factory; 9.....
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....e date on which such capital goods are installed or, as the case may be, used for manufacture of excisable goods, in the factory of the manufacture as certified by such manufacturer or a person designated by him for this purpose. (8) Notwithstanding anything contained in sub-rule (7), a manufacturer intending to remove the capital goods from his factory for home consumption or for export, prior to their being installed or used, as the case may be, shall be allowed to take credit on the date on which such capital goods are so removed by him from his factory on payment of the appropriate duty of excise leviable thereon as provided in rule 57S. RULE 57R. Credit of duty not to be allowed or denied or varied in certain circumstances and adjustment in duty credit - (1) No credit of the specified duty shall be allowed on capital goods which are used exclusively in the manufacture of final products other than final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year which are exempt from the whole of the duty of excise leviable thereon or ....
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....ied duty paid on such capital goods under rule 57T shall bear the name of the manufacturer along with that of the financing company. (4) If a manufacturer of final products has taken credit on any capital goods and subsequently it so happens that any refund of the duty paid by the manufacturer of capital goods or importer of capital goods, as the case may be, is allowed to him tor any reason, then the user manufacturer shall accordingly adjust the amount of credit in his credit account and if such adjustment is not possible for any reason, the user manufacturer shall pay the amount in cash equal to the amount of refund allowed to the manufacturer or, as the case may be, to importer of capital goods. (5) If a user manufacturer has taken credit on any capital goods and subsequently it so happens that any additional amount of duty is recovered from the manufacturer of such capital goods or importer of such capital goods, as the case may be, then the user manufacturer shall be allowed an additional credit equal to the amount of such additional amount recovered. (6) The provisions of sub-rule (5) shall not apply in cases where the duty on capital goods has been short levied or short ....
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....s which are chargeable to "Nil" rate of duty; (c) "final products" means excisable goods manufactured or produced from inputs, except matches; (d) "input" means all goods, except high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation lo the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production, and also includes lubricating oils, greases, cutting oils and coolants. Explanation. - The high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. RULE 57AB. CENVAT credit - (1) A manufacturer or producer of final products shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of, - (i) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the said Firs....
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....of duty relating to the first fortnight of the month, and the last day of a month for payment of duty relating to the second fortnight of the month or in case of a manufacturer availing exemption by notification based on value of clearances in a financial year, for payment of duty relating to the entire month. Explanation.- When inputs or capital goods are removed from the factory, the manufacturer of the final products shall pay the appropriate duty of excise leviable thereon as if such inputs or capital goods have been manufactured in the said factory, and such removal shall be made under the cover of an invoice prescribed under rule 52A. (2) Notwithstanding anything contained in sub-rule (1) - (a) credit of duty in respect of inputs or capital goods produced or manufactured - (i) in a free trade zone and used in the manufacture of the final products in any other place in India; or (ii) by a hundred per cent export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or Software Technology Parks and used in the manufacture of the final products in any place in India, shall be restricted to the extent which is equal to the additional duty leviable on li....
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....he factory of the manufacture. (2) (a) The CENVAT credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year. (b) The balance of CENVAT credit may be taken in any financial year subsequently to the financial year in which the capital goods were received in the factory of the manufacture, provided that the capital goods (other than components, spares and accessories, refractories and refractory materials and goods falling under heading No. 68.02 and sub-heading 6801.10 of the First Schedule to the Central Excise Tariff Act) are still in the possession and use of the manufacturer of final products in such subsequent years. (c) CENVAT credit may also be taken in respect of such capital goods as have been received in the factory, but have not been installed, before the 1st day of April, 2000 subject to the condition that during the financial year 2000-2001, the credit shall be taken for an amount not exceeding fifty per cent of the duty paid on such capital goods. Illustration. - A manufacturer received machine....
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....ts cleared for export, the CENVAT credit in respect of the inputs so used shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final products cleared for home consumption or for export on payment of duty and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitations as may be specified by the Central Government by notification in the Official Gazette. No refund of credit shall, however, be allowed if the manufacturer avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims a rebate of duty under rule 12, in respect of such duty." 13. From the above quoted rules, we find that the definitions of the words "input" under the erstwhile Modvat scheme stood scattered under Rules 57A and 57B whereas under the Cenvat scheme, the definition of the words "input" and "capital goods" have been consolidated. 14. The relevant provisions of Cenvat Credit Rules, 2001 are as follows : "Rule 2. Definitions. - In these rules, unless the context otherwise requires, - (b) "capital goods" means, - (i) all goods ....
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....inal products, but does not include any equipment or appliance used in an office, (e) "final products" means excisable goods manufactured or produced from inputs, except matches; (g) "input" means all goods, except high speed diesel oil and motor spirit, commonly known as petrol used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production. Explanation 1. - The high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2. - Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer; (h) "manufacturer" or "producer" in respect of goods falling under Chapter 61 or 62 of the First Schedule to the Tariff Act shall include a person who is ....
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....B of the Modvat scheme as well as in Clause (d) of Rule 57AA of the Cenvat scheme followed by Rule 2(f) of the Cenvat Credit Rules of 2001 followed by Rule 2(g) of the Cenvat Credit Rules of 2002 and, therefore, it was submitted that the Cenvat scheme was in pari materia to the Modvat scheme and to that extent, the decision of the Division Bench in the case of J.K. Udaipur Udyog Ltd. (supra) needed reconsideration. Learned Counsel submits that the goods mentioned in Clauses (i) to (vi) of Rule 57B(1) as it then stood, also had to satisfy the test embodied in tlie substantive part of the definition in Rule 57(B)(1), namely, of it being used in or in relation to the manufacture of final product. According to the learned Counsel, explosives, lubricating oil and welding electrodes fell in the substantive part of the definition of Rule 57B(1) and even if they are to be treated as falling part within the inclusive part in Clauses (i) to (vi) of Rule 57B(1), still they have to comply with the basic test of being used in or in relation to the manufacture of final product. 17. Learned Counsel next submits that Rule 57] of the Modvat scheme has been incorporated in Rule 57AB of the Cenvat s....
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....l be futile. An item can be treated as "capital goods" under Cenvat Credit Rules only if it satisfies that the goods fell under one of the specified chapters or headings of the Tariff or it is a spare part, component or accessory or that it falls under one of the specified items. Further, the said goods must be used in the factory of the manufacturer of the final product. The new Rule 2(b) of the Cenvat Credit Rules is preceded Rule 57AA(a) read with the explanation which in turn was preceded by Rule 57Q(1). Learned Counsel submits that Rule 57Q of the earlier Modvat scheme came up for consideration in the case of Jaypee Rewa Cement (supra) which has not taken into consideration the concept of captive production of an intermediate product like limestone used in the manufacture of cement which concept is now recognized under Rule 2(b) of the Cenvat Credit Rules. 20. Per contra, learned Counsel appearing on behalf of the department submits that in order to apply Cenvat credit on inputs under Rule 57AA, the inputs should have been used in the factory of production of the final product (cement) and as explosives, lubricating oil and welding electrodes were used at off-factory premises....