Customs, Excise and Gold Tribunal - Delhi
Commissioner Of Central Excise vs Birla Corporation Ltd. on 22 August, 2002
Equivalent citations: 2002(146)ELT215(TRI-DEL)
ORDER P.G. Chacko, Member (J)
1. These are appeals filed by the Revenue against the orders passed by the Commissioner (Appeals). Appeal Nos. E/691/2002 and E/722/2002/NB (SM) are against grant of CENVAT credit under Rule 57AB to the respondents on Explosives used by them for mining limestone at the mines situate away from their Cement Factory. The periods involved in the two appeals are April to June, 2000 and July to September, 2000, respectively. Appeal No. E/723/2002 is against grant of CENVAT credit under the above Rule to the respondents on Lubricating Oils and Greases used by them in their limestone mines. The period involved in this appeal is also July to September, 2000.
2. Examined the records and heard both sides.
3. Ld. JDR representing the Revenue submits that the Explosives and Lubricants were not used within the factory of production of cement (final product) and hence could not be considered to have been used in or in relation to the manufacture of cement. According to the interpretation given by the DR to the term 'input' under Clause (d) of Rule 57AA of the Central Excise Rules, 1944, any goods to qualify for Cenvat credit under Rule 57AB should have been used within the factory of production of final product. Ld. DR submits that the Commissioner (Appeals) has erroneously relied on the Supreme Court's decision in Jaypee Rewa Cement v. CCE [2001 (133) E.L.T. 3 (S.C.)] to hold that the Explosives and Lubricants were eligible inputs for Cenvat credit during the material period. He submits that the ratio of the Apex Court's decision is distinguishable on facts and hence not applicable to the instant case. The DR prays for setting aside the orders of the Commissioner (Appeals).
4. On the other hand, Id. Counsel for the respondents submits that the definition of 'input' under Clause (d) of Rule 57AA is essentially identical to its definition under the erstwhile Rule 57A and, therefore, the ratio of the decision of the Apex Court in Jaypee Rewa Cement (supra) on the question of admissibility of Modvat credit in respect of Explosives used for mining limestone outside Cement Factory is equally applicable to the instant case involving the question of admissibility of Cenvat credit in respect of the same goods used for the same purpose. He submits that the lower appellate authority has rightly decided on the question by following the Supreme Court's ruling. As regards Lubricating Oils and Greases/ Id. Counsel submits that these goods were specifically covered by the definition of input under Clause (d) of Rule 57AA and hence Cenvat credit was not liable to be denied on these goods. Ld. Counsel prays that the impugned orders be affirmed.
5. Having examined the rival submissions and the legal provisions cited by both the sides, I find that the issues involved in these cases are identical to those already decided by this Bench in Appeal Nos. E/720-721/2002-NB(SM) - CCE, Jaipur v. J.K. Udaipur Udyog ltd. [2002 (147) E.L.T. 877 (T)]. The decision of this Bench is contained in paragraphs 6 to 9 of the Final Order dated 20-8-2002 passed in the said appeals, which are extracted below :-
'6. On a careful examination of the records and submissions, I note that both the goods in question viz. Explosives and Lubricants were used outside the respondents' Cement Factory during the relevant period and that, while the Explosives were used for mining lime stone at the off-factory mines, the Lubricants were used for lubricating certain machinery installed in or around the mines. I further note that the respondents' claim was that the Explosives and Lubricants were eligible inputs for CENVAT credit. That claim was under Rule 57AA of the Central Excise Rules, 1944 as amended by Notifications 11/2000-CE. (N.T.), dated 1-3-2000 and 27/2000-C.E. (N.T.), dated 31-3-2000. Both capital goods and input have been defined under that Rule. The definition of "input" is under Clause (d) of the Rule and the same is as under :-
"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 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."
7. The primary question arising for consideration is whether the goods under reference would be covered by the substantive (italicized) part of the above definition. The substantive definition indicates that all goods except high speed diesel oil and motor spirit (Petrol) used in or in relation to the manufacture affinal products whether directly or indirectly and whether contained in the final product or not would qualify to be inputs eligible for CENVAT credit. This substantive definition, as rightly pointed out by Id. Counsel, is no different from the import of the term "input" employed in the erstwhile Rules 57A and 576, whereunder it had been prescribed that inputs for MODVAT credit should have been used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final products or not. As regards Explosives used for mining limestone at the off-factory mines of cement manufacturers, the Apex Court held in the case of jaypee Rewa Cement (supra) that the explosives were eligible for Modvat credit under Rule 57A. In view of parity of the above provisions, the ratio of the Apex Court's decision should be applied equally to the present case for determining as to whether the Explosives used by the respondents for mining limestone at their off-factory mines during the material period were eligible for CENVAT credit. Applying the ratio, I have to affirm the decision of the lower appellate authority holding that the credit was available to the respondents in respect of Explosives.
8. As regards Lubricants, however, the Apex Court's decision cannot be applied inasmuch as the Lubricants were used in an altogether different manner. The lubricants were admittedly used for lubricating certain machinery installed in or around the limestone mines, away from the cement factory. Going by the submissions made by the counsel in answer to queries from the Bench, I observe that such machinery was used for mechanical processes like crushing of limestone outside the cement factory. There is nothing on record to show that the assessee had claimed to be entitled to capital goods credit on such machinery. In my considered view, the lubricants which were used for lubricating the machinery could be considered to have been used in or in relation to the manufacture affinal products, if and only if the machinery itself was used for the manufacture of the final products. If the machinery was not so used, the lubricants would not be considered as having been used in or in relation to the manufacture affinal products.
9. It has been argued by Id. DR with reference to the definition of "input" under Clause (d) of Rule 57AA that, as the lubricants were not used within the factory of production of final products, they could not be inputs covered by that definition. This argument appears to be a square peg in a round hole as the adverbial "within the factory of production" is conspicuously absent in that part of the definition which pertains to lubricants. This position is not supportive of the respondents' case either, because the goods (including lubricants) mentioned in the inclusive part of the definition of "input" are not independent of the main (substantive) part of the definition. Such goods also must satisfy the test embodied in the main part of the definition. In other words, lubricants etc. specified in the inclusive part of the definition of input should also have been used in or in relation to the manufacture affinal products in order that those goods could be called "cenvatable" inputs. The lubricants used by the respondents on machinery at off-factory sites would not satisfy the above test unless it is shown that the machinery was used for the manufacture of cement (final product) and capital goods credit was taken thereon.'
6. Following the above ratio in the instant case, I order as under :-
(a) The decision of the Commissioner (Appeals) allowing CENVAT credit on Explosives to the respondents for the material period is upheld and Appeal Nos. E/691 & 722/2002/NB(SM) are rejected.
(b) The orders passed by the original authority and the lower appellate authority in relation to CENVAT Credit taken by the respondents on Lubricating Oils and Greases used in their limestone mines during July to September, 2000 are set aside and the adjudicating authority is directed to readjudicate the dispute in accordance with law and the principles of natural justice. That authority shall afford a reasonable opportunity to the respondents to prove their case that the Lubricants and Greases were actually used on machinery which was used for the manufacture of cement (final product) and on which capital goods credit was actually taken. If the assessee succeeds in proving so, the Lubricants and Greases shall be held to be 'cenvatable'' inputs and consequently the credit of duty paid thereon shall be granted to them under Rule 57AB. If the assessee fails to satisfy the condition, the CENVAT credit will not be available to them. Appeal No. E/723/2002/NB(SM) stands allowed by way of remand.