COMMISSIONER OF CENTRAL EXCISE, JAIPUR versus J.K. UDAIPUR UDYOG LTD.

Citation: [2004] SUPP. 4 S.C.R. 39 · Decided: 03-09-2004 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Appeal(s) allowed

Judgment (excerpt)

.. 
COMMIS5fONER OF CENTRAL EXCISE, JAIPUR 
A 
v. 
J.K. UDAIPUR UDYOG LTD. 
SEPTEMBER 3, 2004 
[S.N. V ARIA VA AND G.P. MATHUR, JJ.] 
B 
Central Excise Rules, 1944-Modvat Scheme- Rules 57AA, 57AB -
Explosives for blasting mines to excavate limestone used in manufacture of 
cement in a plant few kilometers away from mines-CENVAT Credit -
Disallowed-Commissioner (Appeals) allowing it-On appeal by Revenue, 
C 
held: Use of 'inputs' was not within factory of production-Mines operated 
by assessee itself-Hence CENVAT credit rightly disallowed by authorities. 
Central Excise Act 1944, Section 2(e)-Factory-Scope of-Mine 
connected to factory by ropeway for carrying excavated raw materials is not 
part of factory since no manufacturing activity undertaken therein. 
Practice and procedure-Appeal to Supreme Court in Central Excise 
cases-Plea not raised either in show cause notice or before Excise 
authorities could not be raised for first time before Apex Court. 
Respondent-assessee was using explosives for blasting mines to 
excavate limestone for use in manufacture of cement. The mining area 
was at a distance of few kilometers from the plant where cement was 
manufactured. During the period April to August 2000, they took Cenvat 
Credit under Rule 57 AB of Central Excise Rules, 1944 on the explosives 
used in the mines. The appellant-Revenue issued show cause notice to 
the assessee as to why the aforesaid credit should not be disallowed and 
further action taken against them, on the ground that the explosives 
used for blasting purpose in the mines had not been used in the factory 
premises for production or in relation to the manufacture of final product 
D 
F 
i.e. cement; that as per Rule 57 AB, the input must be used within the 
G 
factory of production and therefore, the explosives do not qualify to be 
inputs for the manufacture of excisable goods in terms of the aforesaid 
rule. The assessee replied that the mining area as well as the cement 
factory, were not only interdependent, but had a direct nexus with each 
other; that the mining activity and the manufacturing activity cannot be 
39 
H 
40 
SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R. 
A 
considered as isolated events as without mining limestone, the cement 
plant cannot be run and that for all practical purposes the mining area 
is an extension of the factory area. Assistant Commissioner, Central 
Excise disallowed the CENV AT credit taken by respondent. Appeal 
preferred by the assessee was allowed by the Commissioner (Appeals) 
B 
on the finding that,the explosives are inputs in terms of Rule 57AB. 
Revenue filed appeal against this order before CEGAT and it was 
dismissed. Hence the present appeals. 
Assessee contended that limestone was brought from the mines to 
the factory by a ropeway and, therefore, the mining area is an extension 
C · of the factory area; and that CENV AT scheme was introduced on 1-4-
2000 but Rule 57 AB was amended on 29-8-2000 and was given 
retrospective effect from 1-4-2000 and it is this amended Rule which 
will govern the situation. 
D 
E 
F 
Allowing the appeals, the Court 
HELD : 1.1. In Rule 57AA of the Central Excise Rules, 1944, the 
expression 'used for manufacture of final products or for any· other 
purpose, within the factory of production' in the definition of 'input' is 
important and it clearly indicates that in order to satisfy the requirement 
of this sub-rule, the article or goods must be used within the factory of 
production. If the article is not used within the factory of production, it 
will not be 'input' within the meaning of sub-rule (d) of Rule 57AB. 
Rule 57 AC deals with conditions for allowing CENV AT Credit and 
under sub-rule (1) thereof such credit can be taken immediately on · 
receipt of the inputs in the factory of manufacture. This provision also 
shows that actual receipt and use of the 'inputs' within the factory of 
production is essential for availing CENV AT Credit. It is the admitted 
case of the assessee that the explosives have been used for blasting purpose 
in the mines and not in the factory where cement is produced and 
consequently on the plain language of sub-rule (d) of Rule 57AA and 
G 
Rule 57AC it will not qualify to be 'input' for which CENVAT Credit 
may be taken under Rule 57 AB. (44-G-H; 45-A-B) 
H 
1 .2. The definition of 'input' as given in sub-rule (d) of Rule 57 AA 
which is material for the present case, is entirely different from the-
manner 'in which the said word 

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