M/S VIKRAM CEMENT versus COMMNR. OF CENTRAL EXCISE, INDORE

Citation: [2006] 1 S.C.R. 465 · Decided: 18-01-2006 · Supreme Court of India · Bench: RUMA PAL · Disposal: Reference answered

Judgment (excerpt)

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MIS VIKRAM CEMENT 
A 
v. 
COMMNR. OF CENTRAL EXCISE, INDORE 
JANUARY 18, 2006 
[RUMA PAL, B.N. SRIKRISHNA AND DALVEER BHANDARI, JJ.) 
B 
.. 
\ 
CENVAT Rules, 2000---Central Excise Rules, 1944-Rules 57AA, 57AB 
and 57AC and erstwhile Rules 57A to 57J---CENVAT credit-On input used 
outside factory-Explosives (input) used in quarrying limestone which in turn c 
used for manufacturing cement (final product) in factory situated at some 
distance away from the limestone mines-Held: Qualifies for CENVATcredit-
Earlier decision in Jaypee Rewa Cement, that MOD VAT was allowable on use 
of explosives in manufacture of cement irrespective of the fact that explosives 
were used directly in limestone mines and never entered factory of manufacturer 
., 
of cement, equal~v applies to CENVAT Rules which replaced the MODVAT D 
). 
Rules-Scheme of C EN VAT credit no different in substance from MOD VAT 
' 
Rules. 
Modified Value Added Tax Scheme (MODY AT) was introduced in 
1986 granting credit of excise duty on inputs used in or in relation to the 
manufacture of final products. The scheme was contained in Rules 57A E 
to 57J of the Central Excise Rules, 1944. In *Jaypee Rewa Cement where 
the input in question was explosives used in quarrying limestone which in 
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turn were used in manufacture of cement, a three Judges Bench of this 
' 
Court had held that MODVAT was allowable on the use of explosives in 
manufacture of cement irrespective of the fact that explosives were used 
directly in limestone mines and never entered factory of the .manufacturer F 
of cement. 
The MODY AT Rules were subsequently replaced by the CENV AT 
Rules. A Division Bench of this Court in **J.K. Udaipur Udyog held that 
the decision in.Jaypee Rewa Cement did not apply to the CENVAT Rules. 
That view was doubted by a Co-ordinate Bench of this Court whereupon G 
I 
a reference was made to the present three Judges Bench for deciding the 
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question whether the decision in Jaypee Rewa Cement would continue to 
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apply to the CENV AT Rules, 2000. 
Answering the reference, the Court 
465 
H 
466 
Slll'RFME COURT REPORTS 
[2006] I S.C.R. 
A 
HELD: I. I. The schemes of MODV AT and CENV AT Credit are not 
B 
c 
D 
E 
F 
G 
H 
different. 1475-Ci 
1.2. Basically there was a re-arrangement of the earlier rules which 
in substance remained the same. 1473-A-BI 
**Commissioner a/Central Excise, Jaipur v. JK. Udaipur Udyog ltd., 
(2004) I 71 EL T 289 SC, overruled. 
*Jaypee Rewa Cement v. CCE, (2001) (133) ELT 3 SC, referred to. 
2.1. In JK. Udaipur Udyog the Court answered the question, whether 
the explosives used for blasting purposes in the mines and which had not 
been used in the factory premises for production or in relation to the 
manufacture of cement could qualify for CENVAT credit, in the negative. 
Three reasons were given by the Court for holding that credit could be 
taken only on inputs received in the factory of the manufacturer of the 
final product. 1475-B; D-EI 
2.2. First, the Court held that the definition of input given in sub-
rule(d) of Rule 57 AA was "entirely different from the manner in which 
the said word had been expounded in the explanation to Rule 57 A of the 
MODVAT Rules". This reading of the provision is not acceptable. There 
was only a re-arrangement of the several provisions of Rule 578 in Rule 
57 AA. Rule 57 AA is in fact more broad based than Rule 578. Analyzed, 
it is clear that sub-rule (d) of Rule 57 AA has merely reframed Rule 578 
to include all the ingredients of inputs while at the same time broadening 
the base not only by referring to "all goods" but also by using the word 
"includes". 1475-D-E; 473-DI 
2.2. Second, the Court proceeded on the basis that under the 
CENVAT scheme there was no provision similar to Rule 57J. But in fact, 
Rule 57J was replaced in substance by Rule 57AB, which provision was 
overlooked. Deletion of Rule 57J of the MODVAT Rules had led to 
controversy and on 29th of August, 2000, a clarification was issued by the 
Central Board of Excise and Customs (CBEC). Consequently, with the 
intention of re-introducing the benefit granted earlier under Rule 57J, Rule 
57AB was introduced under the heading "CENVAT credit". Rule 57AB 
effectively duplicate~ the substance of Rule 57J(t) and (2) and deals with 
a situation where inputs are received by a job worker for production of 
intermediate goods which are used in the manufacture of a final product. 
1475-F; 473-F-G; 474-C, H; 475-AI 
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