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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.

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.

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.

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.