Customs, Excise and Gold Tribunal - Delhi
Jaypee Rewa Cement vs Commissioner Of Central Excise on 7 June, 2000
Equivalent citations: 2000(119)ELT552(TRI-DEL)
ORDER P.G. Chacko, Member (J)
1. The question referred to us as per referral order dated 9-7-1999 passed in the appellants' case is as to whether explosives used in their mines (situated 2 to 5 Kms. away from their cement factory) for mining limestone, which is used for manufacture of cement, are eligible inputs for the purpose of Modvat credit under Rule 57A of the Central Excise Rules. This reference has been occasioned by conflicting decisions of different Benches of this Tribunal. The different decisions noted by the referring Bench are the following :-
(i). Associated Cement Co. Ltd. v. Collector of Central Excise reported in 1991 (55) E.L.T. 415 (Tribunal - 2-Member 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 [Final Order Nos. A/163-66/99-NB (DB) dated 16-3-1999]. (Tribunal - 2-Member Bench).
[Held : Explosives eligible inputs : Tribunal's decisions in the cases of Indian Rayon & Industries Ltd. (supra) and New Vikram Cements (supra) followed.]
(vi). Jaypee Rewa Cement v. CCE, Raipur [Reported in 1998 (29) RLT 399 (CEGAT)]. (Tribunal - Single Member Bench).
[Held : Explosives eligible inputs provided the mines are adjacent to the cement factory and can be called precincts of the cement factory as per approved ground plan of the factory. Tribunal's decisions in the cases of Associated Cement Co. Ltd., Indian Rayon & Industries Ltd. and Maihar Cement (supra) considered Supreme Court's decisions in the cases of Indian Copper Corporation Ltd. (supra) and CCE v. Ballarpur Industries Ltd., 1989 (43) E.L.T. 804 (SC) also considered.]
2. The referring Bench disagreed with the view taken by the different 2-Member Benches in the cases cited above and, agreeing with the view taken by the learned Single Member in the case of Jaypee Rewa Cement v. CCE, Raipur, 1998 (29) RLT 399 (CEGAT), passed the referral order, which brought the issue before us.
3. The brief facts of the case for the purpose of a decision on the referred issue are as follows :
The appellants, namely M/s. Jaypee Rewa Cement are manufacturers of cement falling under chapter 25 of the Central Excise Tariff and are availing the facility of Modvat credit on inputs under Rule 57A of the Central Excise Rules. Limestone is an essential raw material for the manufacture of clinker which is then converted into cement, both manufacture of clinker and its conversion into cement being carried out in the same factory of the appellants. This raw material is obtained from their limestone mines situated 2 to 5 Kms. away from the factory. Various explosives are used for quarrying limestone in the mines. During the period of dispute (April-May, 1995), the appellants took Modvat credit on such explosives, treating the goods as inputs under Rule 57A ibid. The jurisdictional Commissioner of Central Excise disallowed the credit holding that the explosives were not used in the appellants' factory as the limestone mines [which were not registered with the Department under Rule 174 of the Central Excise Rules] did not come within the meaning of the term "factory" under Section 2(e) of the Central 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.
5.1 According 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. J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. STO, AIR 1965 SC 1310.
3. CCE v. Ballarpur Industries Ltd., 1989 (43) E.L.T. 804 (SC).
4. Singh Alloys & Steels Ltd. v. CCE, 1993 (66) E.L.T. 594 (Cal).
5. Ashwin Vanaspati Industries Pvt. Ltd. v. CCE, 1994 (70) E.L.T. 754 (Tribunal - Larger Bench).
6. Shri Ramakrishna Steel Industries Ltd. v. CCE, 1996 (82) E.L.T. 575 (Tribunal - Larger Bench).
7. Commissioner of Sales Tax v. Rewa Coal Fields Ltd., 1999 (5) SCC 715.
5.2. In addition to the above case law. Ld. Advocate has also drawn support from all the decisions of the Tribunal cited at SI. Nos. (i) to (vi) in Para 1 of this order as also from the Tribunal's Final Order No. A/481 /99-NB (S), dated 22-5-1999 in the case of CCE v. Jaypee Rewa Cement.
5.3. Ld. JDR has contested the above arguments by submitting that the process of manufacture of cement starts only after limestone and other raw materials are brought into the factory and the activity of mining limestone, being a process anterior to such manufacture of cement and carried out at a place outside the cement factory, cannot be considered to be a part of the process of manufacture of cement. Therefore, the explosives used in the mining activity would not qualify to be 'inputs used in or in relation to the manufacture' of cement. Ld. JDR has placed strong reliance on the decision of the Tribunal in the case of Madras Cements Ltd. v. CCE, Hyderabad, 1998 (99) E.L.T. 395. According to him, all the decisions cited by ld. Advocate are clearly distinguishable on facts and/or in law.
6.1. Ld. Advocate has, on the second question formulated by himself, submitted that limestone was an "intermediate product" in the "integrated process" of manufacture of cement and that the appellants were working under Rule 57F(3) by getting it "manufactured" at their mines by using explosives as "inputs". Inputs could thus be put to use in a place outside the factory if the manufacturer was covered by the provisions of Rule 57F(3). In his attempt to bring the case within the coverage of the said rule, ld. Advocate has ~i strenuously argued that the mining activity 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).
6.2 Ld. 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 received in, the factory of production of final product (cement) as required under the said provisions. He has drawn support to this contention from the Tribunal's decision cited at Sl.No. (vi) in Para (1) of this order.
7. Ld. Advocate has not denied that the explosives were not brought into the factory or removed therefrom to the mines, nor has he contested the DR's submission that the procedure of Rule 57F(3) was not followed. However, he would still adhere to Rule 57F(3) by contending that any procedural lapse under the rule was only condonable and not fatal to the appellants' case. In support, he has relied on the Tribunal's decisions in a host of cases like India Paper Pulp v. CCE, 1994 (73) E.L.T. 601.
8. The issue before us is whether the explosives used by the appellants in their mines (away from the cement factory) for mining limestone, which was, in turn, used as raw material for the manufacture of cement, were eligible 'inputs' for the Modvat credit under Rule 57A during the period of dispute. This issue, by its very complexion, requires to be dealt with as a whole. The two questions as framed by ld. Advocate for resolving the issue are, in our view, not independent of each other. We shall, therefore, address ourselves to the issue without attempting to fragment it.
9.1. The credit allowed under Rule 57A is of the duty paid on inputs. The definition of the term "input" is inbuilt in the rule itself. Accordingly, inputs are goods used in or in relation to the manufacture of the final product whether directly or indirectly and whether contained in the final product or not. Rule 57F lays down, inter alia, the manner of utilisation of the inputs. Clause (i) of Sub-rule (1) of the rule reads as under:
RULE 57F. Manner of utilisation of the inputs and the credit allowed in respect of duty paid thereon. - The inputs in respect of which a credit of duty has been allowed under Rule 57A -
(i) may be used in, or in relation to, the manufacture of final products for which such inputs have been brought into the factory.
9.2. It is clear from the plain words used in the above clause that the inputs, in respect of which Modvat credit has been allowed under Rule 57A, are required to be brought into the factory for being used in or in relation to the manufacture of final products. Appellants have no case 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).
10.1 Clause (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:
(3) Notwithstanding anything contained in Sub-rule (1), a 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 final products and return the said intermediate products to his factory, for, -
(i) further use in the manufacture of the final product;
(ii)....
(iii)....
Provided that the waste, if any, arising in the course of such operation is also returned to the said factory:
Provided further that the said waste need not be returned to the said factory after the appropriate duty of excise leviable thereon has been paid.
10.2. The ingredients of the above provision are noteworthy, which are as follows :-
(a) There should be a removal of input by the manufacturer of final product; (b) Such removal should be from his factory to a place outside it; (c) The input so removed should be either in its original form or in a partially processed form; (d) Any such partial processing of input must have been carried out during the course of manufacture of the final product in the factory; (e) The input (as such or partially processed) should be used for a manufacture at the place outside the factory, (f) Such manufacture should be of an intermediate product necessary for the manufacture of the final product; (g) Such intermediate product should be returned to the factory; (h) The intermediate product so returned should be used further in the manufacture of the final product; (i) The entire course aforesaid must have been taken with prior intimation to the jurisdictional Assistant Collector.
10.3. The prime requirement of the above provisions, as it appears to us, is that the goods removed from the factory of production of the final product to the place outside the factory should be an input (as such or in partially processed form) within the meaning of this term under Rule 57A. Moreover, the removal of such input should be from the factory as also with prior intimation to the Assistant Collector. Even if it be postulated that the explosives in the appellants' case were 'inputs' under Rule 57A and that the requirement of the goods having to be removed from the factory and with prior intimation to the Assistant Collector could be lawfully dispensed with, can the other requirements of Rule 57F(3)(b) be held to have been satisfied in their case? A cursory glance through the ingredients of the rule enumerated supra would suffice to answer this question in the negative. If the input removed to the place outside the factory under Rule 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 dynamics of the explosion caused the blowing up of the rock. Indisputably, there occurred no processing of the explosives into limestone, and therefore the limestone received in the appellants' cement factory did not contain any trace of the explosives in any form whatsoever. It must follow that the limestone brought into the factory did not qualify to be "intermediate product" for purposes of Clause (b) ibid.
10.4. Ld. Advocate has contended that limestone is an excisable item classified under Chapter sub-Heading 25.05 of the Central Excise Tariff and therefore its recovery from earth by mining activity would amount to "manufacture". Though this argument does not appear to be relevant in the light of the finding we have already recorded, we shall consider it, having regard to ld. Advocate's reliance on the decisions in Ashwin Vanaspati Inds. (supra) and Hyderabad Asbestos Cement Products (supra). On a careful examination of the provisions of Chapter 25 of the Central Excise Tariff, we find that the limestone in the form it is obtained by blasting, is not covered by Chapter Heading 25.05 by virtue of Chapter Note (2) which reads as under:-
"2 Except where their context otherwise requires, heading Nos. 25.01, 25.03 and 25.05 cover only products which have been washed (even with chemical substances, eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, or concentrated by floatation, magnetic separation or other mechanical or physical processes (except crystallisation), but not products that have been roasted, calcined, obtained by mixing or subject to processing beyond that mentioned in each heading or sub-heading."
The limestone resulting from the blasting activity is not a product washed, crushed, ground, powdered, levigated, etc., as required under the above chapter note for the purpose of its classification under Chapter Heading 25.05. In this connection, we have also noted Heading 25.21 of the HSN Explanatory Notes, which covers, among other things, limestone. Chapter Note (1) under Chapter 25 of the HSN explanatory notes reads as under :-
"Except where their context or Note 4 to this Chapter otherwise requires, the headings of this Chapter cover only products which are in the crude state or which have been washed (even with chemical substances eliminating the impurities 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 Ashivin 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 cement.
10.5. Ld. Advocate's reliance on the Delhi High Court's judgment in Hyderabad Asbestos Cement Products (supra) in support of his contention that the process of recovery of limestone at the mines amounted to "manufacture" under Section 2(f) of the Central Excises & Salt Act is also of no avail since the High Court's decision stands reversed by the Supreme Court as rightly pointed out by ld. JDR. In the above case, High Court had held that the conversion of asbestos rock into asbestos fibre amounted to "manufacture" under Section 2(f) ibid on account of the fibre being a saleable item known to the market and having been covered by a specific Tariff entry. A 3-Judge Bench of the Apex Court, reversing the High Court's decision, held vide 1995 (78) E.L.T. 641 (SC):
"...all that the appellants in Civil Appeal 1354 of 1980 do is to separate the asbestos fibre from the rock in which it is embedded by manual and mechanical means. The asbestos fibre that is so removed from the parent rock is in every respect the asbestos that was embedded in it. No process of manufacture can be said to have been employed by the appellants nor is a new or a distinct commodity realised therefrom."
"Assuming that Tariff item 22F, when it refers to "asbestos fibre and yarn", covers asbestos fibre that has been separated from its parent rock in the manner aforementioned, such asbestos fibre is not the result of a process of manufacture, it is not a new and commercially identifiable article and it is, therefore, not liable to excise duty."
A Constitution Bench of the Court has declared the above decision as conclusive on the issue, in Hyderabad Industries Ltd. v. Union of India, 1999 (108) E.L.T. 321 (SC) cited by ld. DR. It has to be noted that the above ruling of the Apex Court was rendered in a case where the goods (asbestos fibre) was recovered from asbestos rock by an intensive process involving a series of operations and was also an item covered by specific entry (T.122F) the Central Excise Tariff prevailing at the time relevant to the case. The limestone in the instant case is, admittedly, obtained by a single operation viz. blasting of the rock with explosives. It is also not an item specifically covered by any Heading/Sub-Heading under the Central Excise Tariff. In view of this contrast between limestone of the appellants and asbestos fibre of M/s. Hyderabad Industries 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, Id 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 relied on by ld. DR, this rule provides the procedure to be followed by a manufacturer of final product for taking credit of duty under Rule 57A on the inputs used by him in or in relation to the manufacture of the final product. The first proviso to Sub-rule (2) stipulates that no credit shall be taken unless the inputs are received in the factory under cover of appropriate document evidencing payment of duty on such inputs.
13. More than Rule 57G (2), the provisions of Rule 57F(1)(i) read with Rule 57A appear to hold the key to resolution of the issue before us. According to the definition of the term "inputs" inbuilt in Rule 57A, only those goods will qualify to be inputs which are used in or in relation to the manufacture of final product, whether directly or indirectly and whether contained in the final product or not. Rule 57F(1)(i) requires mat such inputs should be brought into the factory for the purpose of being used in or in relation to the manufacture of the final product. In the appellants' case, the explosives were admittedly not brought into the cement factory, nor were they used at any stage of conversion of raw materials (including limestone) to the final product (cement) in the factory. The explosives were used at a place away from the cement factory, and that too, for an activity which per se did not amount to "manufacture" under Section 2(f) of the Act and was anterior to the process of manufacture of cement carried out in the factory. They also did not attract the provisions of Rule 57F(3). By virtue of the provision of Rule 57F(1)(i), the meaning of the expression "goods used in or in relation to the manufacture of the final products" occurring in Rule 57A cannot be extended to include any goods used outside the factory of production of the final products unless such goods are covered by the provisions of Rule 57F(3). The explosives in question, therefore, cannot be held to be "goods used in or in relation to the manufacture of cement" and consequently they would not qualify to be 'inputs' for the Modvat credit under Rule 57A. The reliance placed by ld. DR on the Tribunal's decision in Madras Cements Ltd. (supra) is, in our view, apposite to this context and requires to be accepted.
14. In the case of Madras Cements Ltd. (supra), the appellants had claimed Modvat credit under Rule 57Q in respect of Hydraulic Excavator used in the mine situated 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 agreement with the view taken by the Bench in Madras Cement Ltd. (supra). In this context, we also note that the above view has been approve by a 5-Member Larger Bench of this Tribunal in the case of Vikas Industrial Gas v. CCE, Allahabad, 2000 (118) E.L.T. 257 (T-LB).
15. In Vikas Industrial Gas (supra), the appellants were manufacturing industrial gases in their factory located at Vikas Nagar, Renukoot. The water required for the manufacturing activity was brought by pipeline from a dam reservoir situated 1 Km away from the factory. The question before the Larger Bench was whether Modvat credit under Rule 57Q was admissible to the appellants in respect of the pump-set installed at the reservoir for delivering water from the reservoir through the pipeline to the factory. Like the mines in the instant case, the site of the pump-set was not registered with the Department under Rule 174 of the Central Excise Rules. The appellants argued that the concept of "factory" should be extended to the pumping site. The Bench negatived this argument and, after examining the definition of the term "factory" under Section 2(e) of the Act, held that the places covered by such definition were premises and precincts of the factory and not any premises beyond the factory premises and precincts. The Bench further held that any manufacturing process would commence only after all the materials required for the manufacture were brought into the factory. It was further clearly held that the manufacturing process did not extend to procurement of raw materials. We are in full agreement with the view taken by the Larger Bench in Vikas Industrial Gas (supra). Accordingly, we hold that the process of manufacture of cement did not extend beyond the bounds of the cement factory as registered with the Central Excise Department under Rule 174 and that the mining activity outside the factory, being an activity for procurement of a raw material (limestone), was only a process anterior to the commencement of the process of manufacture of cement and therefore did not form part of the manufacture.
16. None of the decisions mentioned at SI. Nos. 1 to 7 in Para (5.1) of this order, cited by ld. Advocate, has supported the appellants' case. One of them has, indeed, worked against them. In the case of Indian Copper Corporation (supra), the appellants mined copper ores from their own mines, transported 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 expression "goods intended...goods for sale" and took a view as under:
The expression "in the manufacture of goods" should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would, in our judgment, fall within the expression "in the manufacture of goods."
"The expression "in the manufacture" takes in, within its compass all processes which are directly related to the actual production."
The court then held 'designing' to be a process directly related to the actual production of goods (cotton textiles, etc.) as commercial production would be inexpedient without such designing. It further held that the drawing and photographic materials used for designing must therefore be regarded as goods intended for use "in the manufacture of goods" within the meaning of this expression under Rule 13 ibid. In Commissioner of Sales Tax v. Rewa Coal Fields Ltd. (supra), a 5-Judge Bench of the court had to decide a question referred to it by a Division Bench and this very question was whether the law laid down in Indian Copper Corporation (supra) and J.K. Cotton (supra) would apply in full force to the issue which had arisen under the Madhya Pradesh General Sales Tax Act, 1958. The said issue was whether certain articles could be held to have been "consumed in the process of manufacture" within the meaning of this expression contained in the definition of "raw material" under Section 2(1) of the M.P. Act. Mining of coal was the manufacturing activity under consideration. The Larger Bench held that the decision in Indian Copper Corporation (supra) was not apposite to the said issue, and it chose to go by the definition of "raw material" under the M.P. Act for deciding the issue. The Bench held that timber (which was used as a supporting device in the mine to prop up its walls), kerosene (used in lanterns for illumination purposes in the mine), dry cells, torches & electrical bulbs (used for similar illumination purposes) and cement & lime (used to seal leakages and to plaster holes in the mine) did not qualify to be articles "consumed in the process of manufacture". More significantly, 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 expression "goods used in relation to the manufacture of the final product" under Rule 57A. This rule is one of the rules (57A to 57J) contained in Section 'AA' of the Central Excise Rules. The availment of Modvat credit of duty paid on such goods (inputs) under Rule 57A has to be subject to other provisions of the said Section 'AA' (vide text of Rule 57A). One of such "other provisions" is Rule 57F and, as we have already found. Clause (i) of Sub-rule (1) of this rule requires that the inputs should be brought into the factory for being used "in or in relation to the manufacture of the final product". We state these provisions, some of them in repetition, only to show that [where the provisions of Rule 57F(3) are not attracted] the extent of "relation" of "inputs" to the manufacture of the final product is circumscribed by a locus, which is the factory of production of the final product. This position under the Central Excise Law, in our view, is in contrast to the situation obtaining under the Central Sales Tax Act in which there appears to be no limiting factor of locus to limit the relation of "goods" to the "manufacture or processing of goods for sale" under Section 8(3)(b) ibid read with Rule 13 ibid. For this reason too, Indian Copper Corporation (supra) and J.K. Cotton (supra) may not be applicable to the present case.
18. We have also noted that, in the other cases cited by ld. Advocate [vide para (5.1) of this order] viz. C.C.E. v. Ballarpur Industries Ltd.; Singh Alloys & Steel Ltd. v. A.C.C.E.; Ashwin Vanaspati Industries (Pvt.) Ltd. v. C.C.E.; Shri Ramakrishna Steel Industries Ltd. v. C.C.E., the goods held to be raw materials or inputs were all goods brought into and used in, the respective factories of production of final products. None of the goods was used in any activity or process anterior to the process of conversion of raw materials into the final products. The case of the explosives in question was altogether different as we have already found. Therefore, the decisions in the above cases would not lend any support to the present case.
19. In view of our findings recorded hereinbefore, the decisions of different Benches of the Tribunal cited at SI. Nos. (i) to (vi) in Para (1) and the decision in Final Order No. A/481 /99-NB (SM) mentioned in (5.2) have to be held to be incorrect. The issue referred to us stands answered in favour of the Revenue by following the ratio of the decision of the SRB in Madras Cements (supra) and that of the Larger Bench in Vikas Industrial Gas (supra). The present appeals are dismissed.