TaxTMI 
TaxTMI 
2005 (8) TMI 659
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....s and not within the factory in which cement (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 t....
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.... sub-rule (d) of Rule 57AA of the Rules and the omission 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 Custo....
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....xcise paid under section 3A of the Central Excise Act, 1944 {1 of 1944), shall 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 gen....
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....tral Excise Tariff Act, 1985 (5 of 1986), other than the following, namely :- (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; (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 cla....
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....5.90, 7216.10 and 7216.90 on which duty is paid under section 3A of the Central Excise Act, 1944(1 of 1944). 2. All goods falling under chapter 84 (other than internal combustion engines falling 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....
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....he credit of the specified duty on capital goods (other than those capital goods covered under S. Nos. 5, 7,10,11 and 12 of column (2) of the Table below sub-rule (1) and received in the factory on or after the 1st day of January, 1996, shall not be taken on a date prior to the 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....
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....ii) The manufacturer and the financing company shall not claim depreciation under the Income-tax laws on that part of the value of capital goods which represents the amount of specified duty paid on such capital goods. (iv) The relevant documents required for the purpose of availing credit of the specified 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 capi....
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.... used in the factory of the manufacturer of the final products. Explanation. - For removal of doubts, it is hereby clarified that "capital goods" do not include any equipment or appliances used in an office. (b) "exempted goods" means goods which are exempt from the whole of the duty of excise leviable thereon, and includes goods 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 i....
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.... are removed as such or after being partially processed, or such capital goods are removed as such. Provided that while paying duty in the manner specified under sub-rule (1) of rule 49 or sub-rule (1) of rule 173G, as the case may be, the CENVAT credit shall be utilized only to the extent such credit is available on the fifteenth day of a month for payment 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 i....
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....nt of partial or full exemption on condition of nonavailability of credit of duty paid on any input or capital goods, the provisions of such other rule or notification shall prevail over the provisions of the rules made under this section. RULE 57AC Conditions for allowing CENVAT credit. - (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the 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. ....
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....an order in each removal of such inputs or partially processed inputs, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid, allow finished goods to be cleared from the premises of the job worker. (7) Where any inputs are used in the final products which are cleared for export under bond or used in the intermediate products 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 definiti....
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....er Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act; (ii) pollution control equipment; (iii) components, spares and accessories of the goods specified at (i) and (ii) above; (iv) moulds and dies; (v) refractories and refractory materials; (vi) tubes and pipes and fittings thereof; and (vii) storage tank, used in the factory of the manufacturer of the final 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 fact....
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....able with equal force to the instant case involving the question of admissibility of Cenvat credit in respect of the same goods used for the same purpose. In this connection, it was further submitted that the essential condition to be satisfied, for the purposes of taking credit under both the Schemes was that the input should have been used in or in relation to the manufacture of final product. Learned counsel submits that the said condition finds place in Rule 57B 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 Cou....
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....in the factory of production" must be read with the words preceding thereto, namely, "generation of electricity to be used for manufacture of final product or for any other purpose". 19. On the question of "capital goods", we find that Rule 2(b) of Cenvat Credit Rules gives a specific definition of the term "capital goods". It is not an inclusive definition with the result that any exercise to treat an item as "capital goods" by adopting any interpretative process will 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 ....