LexM/S. MARUTI SUZUKI LTD versus COMMISSIONER OF CENTRAL EXCISE-III, DELHI
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[2009] 13 (ADDL.) S.C.R. 301 .. .;..; MIS. MAHUTI SUZUKI LTD. A v. COMMISSIONER OF CENTRAL EXCISE-Ill, DELHI (Civil Appeal No. 5554 of 2009 etc.) AUGUST 17, 2009 8 [S.H. KAPADIA AND AFTAB ALAM, JJ.] ,;;. CENVAT Credit Rules, 2002 - r. 2(g) - 'Input' - Connotation of - Electricity, generated by assessee- manufacturer, wheeled out to its sister units, vendors etc. at c a price, whether admissible for CENVA T credit - Held: All the considerations used in inclusive part of the definition of 'input' are not relevant per se - The inputs become relevant only " when they are used in or in relation to the manufacture of final product - The definition of 'input' has to be read in its entirety D - Electricity generation is an 'input' to the extent it is used for manufacture of final product - Electricity wheeled out to joint units, vendors etc. for a price, cannot fall within the definition of 'input' - Hence, would not be admissible for CENVAT credit - CENVA T Credit f?ules, 2004. E The issues for consi!deration in the present appeals were the interpretation eif the word 'input' as defined in ~ Rule 2(g) of CENVAT Credit Rules, 2002; and whether the ~ Department was right in reversing proportionate CENVAT F credit to the extent of power wheeled out by the appellant- assessee to its sister units, vendors, joint ventures. Dismissing the appeals of assessees and allowing that of the Revenue, the Court HELD: G ~ Civil Am~eal Nos. 5554 and 5555 of 2009: .. 1.1. The two considerations namely, use of input in 301 H 302 SUPREME COURT REPORTS [2009) 13 (ADDL.) S.C.R A the manufacturing process, be it direct or indirect as also absence of the input in the final product on account of the use of the expression "used in or in relation to the manufacture of final product" are irrelevant. Consideration such as input being used as packing B material, input used as fuel, input used for generation of electricity or steam, input used as an accessory and input used as paint are per se also not relevant. All these considerations become relevant only when they are read with the expression "used in or in relation to the c manufacture of final product" in the substantive/specific part of the definition. In each case it has to be established that inputs mentioned in the inclusive part is "used in or in relation to the manufacture of final product". It is the functional utility of the said item which would constitute 0 the relevant consideration. Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not become an eligible input. [Para 16) [338-0-G] 1.2. The expression "used in or in relation to the E manufacture" have many shades and would cover various situ'ations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the F manufacture of final product. [Para 16) [339~H; 340-A-B] 1.3. One has to re~d the definition of 'input' in its entirety. The definition is in three parts, namely, specific part, inclusive part and place of use. All the three parts are required to be satisfied before an input becomes an G eligible input. [Paras 16 and 17) [339-0-E] 1.4. It may be noted from the CENVAT Credit Rules of 2004 vis-a-vis CENVAT Credit Rules of 2002 that the word "for" in the inclusive part after the words "steam used" is substituted by the words "used in or in relation H to the manufacture of final products". In other words, the MARUTI SUZUKI LTD. v. COMMISSIONER OF 303 CENTRAL EXCISE-Ill, DELHI crucial requirement of the definition clause is restated by A the Legislature. An item would fall within the category of "inputs" as defined only on compliance with all the three parts of the definition clause. [Para 18] [339-E-G] J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. B S. T.O. 1965 (16) STC 563; Union Carbide India Ltd. v. Collector of Central Excise, Calcutta-I 1996 (86) ELT 613 (Tri); Collector of Central Excise, New Delhi v. Mis. Ballarpur Industries Ltd. (1989) 4 SCC 566, referred to. 2.1. When the electricity generation is a captive c arrangement and the requirement is for carrying out the manufacturing activity, the electricity generation also forms part of the manufacturing activity and the "input" ~ used in that electricity generation is an "input used in the
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