TaxTMI 
TaxTMI 
2000 (6) TMI 49
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....mber Bench). [Held: Explosives eligible inputs: The Supreme Court's decision in the case of Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes 1965 (16) STC (SC) relied on.] (ii). Indian Rayon & Industries Ltd. v. Collector of Central Excise reported in 1995 (76) E.L.T. 358 (T). (Tribunal - Single Member Bench). [Held: Explosives eligible inputs: Tribunal's decision in the case of Associated Cement Co. Ltd. (supra) followed] (iii). Collector of Central Excise, Indore v. New Vikram Cements reported in 1997 (95) E.L.T. 98 (T). (Tribunal - 2-Member Bench). ' [Held: Explosives eligible inputs: Tribunal's decisions in the cases of Associated Cement Co. Ltd. (supra) and Indian Rayon & Industries Ltd. (supra) followed.] (iv). CCE, Raipur v. Maihar Cement reported in 1997 (21) RLT 564 (CEGAT). (Tribunal - 2-Member Bench). [Held: Explosives eligible inputs: Tribunal's decisions in the cases of Associated Cement Co. Ltd. (supra) and Indian Rayon & Industries Ltd. (supra) followed.] (v). Jaypee Rewa Cement v. CCE, Raipur [F....
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....tral Excise Act, 1944. The appeals before us are against the order of the Commissioner. 4.We have heard ld. Advocate Shri V. Sridharan, for the appellants and ld. JDR Shri Sanjeev Srivastava, for the Revenue. 5.1According to ld. Advocate, the issue can be resolved by answering two questions viz. (i) whether the explosives used by the appellants for mining limestone, which was intended to be used as raw material in the manufacture of cement in their off-site factory, could be held to be 'inputs' within the meaning of this term under Rule 57A of the Central Excise Rules, and (ii) whether, in the event of the said question being answered in the affirmative, Modvat credit on inputs under Rule 57A could be denied in respect of the explosives on the ground that the mines where they were used were not any part of the factory of production of final product (cement). Ld. Advocate has contended that the first question requires to be answered in the affirmative by applying the ratio of the following decisions: 1. Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, 1965 (65) STC 259 (SC). 2. &n....
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....amounted to "manufacture" and therefore limestone was a "manufactured product" which, according to him, was excisable under Chapter Heading 25.05 of the Central Excise Tariff. He has drawn support to these arguments from the Delhi High Court's decision in the case of Hyderabad Asbestos Cement Products Ltd. v. Union of India, 1980 (6) E.L.T. 735 and has also relied on Chapter Note (2) to Chapter 25 of the Tariff as well as Chapter Note (1) to Chapter 25 of the HSN. Counsel has also claimed support from the Tribunal's decision in Ashwin Vanaspati (supra). 6.2Ld. DR has countered the above arguments by submitting that Rule 57F(3) was not applicable to the appellants' case; that the explosives were never brought into the factory, let alone removed to the mines from the factory, as required under the rule; and that the appellants had never followed the procedure prescribed under the rule for the purpose of availing any benefit thereunder. Ld. DR has then stated his own case on the basis of the provisions of Rule 57F(1) and Rule 57G(2). He has contended that the explosives did not qualify to be 'inputs' for the Modvat credit under Rule 57A inasmuch as they were never brought into, or ....
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....se that their mines (where the explosives were used) were part of the cement factory. Therefore the above requirement was not fulfilled in respect of the explosives, which were, admittedly, not brought into the factory of production of cement (final product). 10.1Clause (b) of Rule 57F(3) has been heavily relied on by ld. Advocate. This provision, as it stood at the relevant time, enabled a manufacturer to remove inputs as such from his factory to a place outside the factory for the purpose of manufacture of intermediate products and to receive such intermediate products in the factory for further use in the manufacture of the final products. The relevant provision reads as:Under: Notwithstanding anything contained in sub-rule (1), a(3) manufacturer may after intimating the Assistant Collector of Central Excise having jurisdiction over the factory and obtaining dated acknowledgement of the same, remove the inputs as such, or after the inputs have been partially processed during the course of manufacture of final products, to a place outside the factory,- (a) ............... (b) for the purposes of manufacture of intermediate products necessary for the manufacture of the....
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.... 57F(3) is in the unprocessed form, it has to be processed at such place. If the input is in a partially processed form, then it has to undergo further processing at the said place. In either case, a product, to be used later on as intermediate product in the manufacture of the final product in the factory, should emerge out of such processing. It is also necessary that the processing of the input into the intermediate product should amount to "manufacture" as understood in the Central Excise law. It is significant to note that Clause (b) of Rule 57(F) speaks of return of the intermediate product to the factory. It also speaks of return to the factory, of the waste, if any, arising out of the above processing. It is abundantly clear from the expression "return to the factory" used in Clause (b) ibid that the input should be contained substantially, if not wholly, in the intermediate product received in the factory from the place where such product has been manufactured. In the appellants' case, the explosives were used at the mines to blast the limestone rock embedded in the earth's crust. They exploded, getting reduced to their debris or otherwise destroyed in the process. The dyn....
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.... without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation), but not products which have been roasted, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading." It is noteworthy that items covered by Heading No. 25.21 (including limestone) of Chapter 25 of the HSN can be either in the crude state or in the state of having been washed, crushed, ground, powdered, etc. The words "in the crude state" are conspicuously absent in Chapter Note (2) of Chapter 25 of the Tariff. It, therefore, follows that the limestone resulting from the blasting activity in the appellants' mines cannot be an excisable item covered by Chapter Heading 25.05 as claimed by ld. Advocate. In Ashwin Vanaspati Inds. (supra), it was a distinct excisable commodity that was held to be "intermediate product" as having been "manufactured". The decision in the said case is, therefore, of no support to the appellants' argument that limestone was "manufactured" as an "intermediate product" to be used in the manufacture of cem....
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....ndustries Ltd., it has to be held, a fortiori, that no "manufacture" was involved in the appellants' activity of mining limestone. Consequently, any applicability of Rule 57F(3) (b) to their case can only be ruled out. We may, contextually, recall one specific argument of ld. Advocate who submitted: "Even if limestone is non-'excisable, it would be covered by Rule 57F(3)(b), if it is a product of manufacture". We have the advantage of taking our cue from this argument of ld. Advocate to justify our conclusion on the question of applicability of Rule 57F(3)(b) to the appellants' case. 11.Thus we find that neither the explosives and limestone of the appellants nor their mining activity in question attracted the provisions of Rule 57F(3)(b) as rightly contended by ld. JDR. Consequently, ld Advocate's arguments touching procedural aspects of the said provisions and his reliance, in this connection, on Tribunal's decisions in cases like India Paper Pulp (supra) must fall through. If we may now fall back on Rule 57F (1) (i), we have already found that the appellants did not fulfil the requirement of this provision either. 12.As regards Rule 57G, which has also been forcefully relie....
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....ituated outside, albeit adjacent to, their factory for mining limestone to be used as raw material in the manufacture of cement. The Bench held that mining of limestone was not an integral part of manufacture of cement and therefore Modvat credit was not admissible on the excavator. The reasoning of the Bench is contained in Para (5) of its order extracted below: - ". ....the areas which are relatable to the activity of the manufacture of the cement will alone be taken to be covered under the definition of cement (sic.). For the purpose, we have to consider as to where the manufacturing process starts and where it ends. The manufacture of the cement can be taken to start only at the stage where the raw materials which are brought in within the factory or taken in for processing are stored and thereafter rendered usable for the manufacture of the cement. That would mean, the process will start from the end at the stage where the limestone has entered the cement factory and is taken up for crushing for desired use in the cement mill. In our view, therefore, the process of mining carried out could not be taken be encompassed or for the manufacture of cement." We are fully in agr....
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....ted the ores to their factory, manufactured copper products from the ores in the factory and conducted inter-State sales of such products as dealers registered under the Central Sales Tax Act and the Rules thereunder. The question which arose before the Supreme Court was whether the motor vehicles used for removing the raw materials from the mines to the factory and also the cane baskets used for carrying the ores and other materials at the mining site were covered by the expression "goods intended for use in the manufacture or processing of goods for sale" within the meaning of Section 8(3)(b) of the above Act read with Rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957. The court answered the question in the affirmative after holding that the mining and manufacturing activities of the appellants were an integrated process. Ld. Advocate has heavily relied on this decision to buttress his argument that the mining and manufacturing operations of the present appellants constituted an "integrated process" and therefore the explosives should be held to have been used in the manufacture of cement. In J.K. Cotton (supra), the Apex Court, again, considered the above ....
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....ly, the Bench held that the purposes for which the said items were used in the mine were not integral to the mining activity. If the purposes for which the goods in question were used in the mine were not integral to the process of mining, then how could it be said that the purpose for which explosives were used at places away from the manufacturing activity in the present appellants' case was integral to the manufacture of cement? We have to accept and follow the law laid down by the Larger Bench of the Apex Court. Therefore, we would hold that the mining of limestone was not integral to the manufacture of cement in the instant case. Ld. Advocate's reliance on Indian Copper Corporation (supra) and J.K. Cotton (supra) has not advanced the appellants' case. 17.We have followed the principle of law laid down in Rewa Coal Fields (supra) by deciding the issue before us in the light of the clear meaning of the relevant, terms and expressions used in the Central Excise Act and Rules thereunder, without having regard to anything contained in any other statute. We have carefully considered the definitions of "manufacture" and "factory" under Section 2 of the Act and the meaning of the e....