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Civil Appeal No. 1197 of 2005 with C.A. Nos. 34222, 4149-4153, 4120-4122, 7175-7189 of 2004, 2318-2320, 1815, 6514, 1613, 6169-71, 6698 of 2005 and SLP (C) Nos. 23205 of 2003 & 19603 of 2005. Case: Vikram Cement Vs Commissioner of Central Excise, Indore. Supreme Court (India)

Judgment Cited in 17 Precedent Map Related
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Case NumberCivil Appeal No. 1197 of 2005 with C.A. Nos. 34222, 4149-4153, 4120-4122, 7175-7189 of 2004, 2318-2320, 1815, 6514, 1613, 6169-71, 6698 of 2005 and SLP (C) Nos. 23205 of 2003 & 19603 of 2005
JudgesRuma Pal, B.N. Srikrishna and Dalveer Bhandari, JJ.
IssueCentral Excise Rules, 1944
Citation2006 (194) ELT 3 (SC)
Judgement DateJanuary 18, 2006
CourtSupreme Court (India)

Judgment:

Ruma Pal, J.

  1. The question whether the decision in Jaypee Rewa Cement v. CCE - 2001 (133) ELT 3 (SC) would apply to the Cenvat Rules, 2000 framed under the Central Excise Tariff Act, 1985 (referred to as the ''Act'') is to be decided on a reference made in this case. A Bench of two judges of this Court in Commissioner of Central Excise, Jaipur v. J.K. Udaipur Udyog Ltd. - 2004 (171) ELT 289 (SC) held that Jaypee Rewa Cement did not apply to the Cenvat Rules. The view was doubted in this case by a Bench of co-ordinate strength which referred the following question to us:-

    "In the light of the provisions of the Cenvat scheme vis-a-vis Modvat scheme reproduced hereinabove, we are of the view that the observations made in paragraph 9 of the decision of the Division Bench, quoted above, in the case of Commissioner of Central Excise, Jaipur v. J.K. Udaipur Udyog Ltd. reported in 2004 (171) ELT 289 needs reconsideration".

  2. The reference was made in the factual context of the appellants availing of Cenvat credit on explosives and other inputs used in quarrying limestone, which was in turn used for the manufacture of cement and clinkers, which are classifiable under Chapter 25. The limestone mines of the appellants are situated at some distance away from the factory premises of the appellants. The Adjudicating Authority held that the appellants were not entitled to the credit availed of by the appellants and raised a demand for excise duty only on the explosives. The narrower question raised in this appeal therefore is whether the adjudicating authority was correct in denying the appellants the Cenvat credit on the inputs.

  3. On the broader question, namely, whether there is a difference in substance between the Modvat and the Cenvat schemes, Modified Value Added Tax Scheme (Modvat) was introduced in 1986 granting credit of excise duties used in or in relation to the manufacture of final products. The scheme was contained in Rules 57A to 57J of the Central Excise Rules, 1944 (referred to as the ''Rules''). We set out below the relevant extracts of these Rules:-

    "Rule 57A - Applicability. --

    (1) xxxxxxxxxxxx

    (2) xxxxxxxxxxxx

    (3) xxxxxxxxxxxx

    The credit of specified duty under this(4) section shall be allowed on inputs used in the manufacture of final products as well as on inputs used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not."

    Rule 57B. Eligibility of credit of duty on certain inputs. -- Notwithstanding anything contained in(1) Rule 57A, the manufacturer of final products shall be allowed to take credit of the specified duty paid on the following (inputs), used in or in relation to the manufacture of the final products, whether directly or indirectly and whether contained in the final products or not, namely:-

    (i) inputs which are manufactured and used within the factory of production;

    (ii) paints;

    (iii) inputs used as fuel;

    (iv) inputs used for generation of electricity or steam, used for manufacture of final products or for any other purpose, within the factory of production;

    (v) packing materials and materials from which such packing materials are made provided the cost of such packing materials is included in the value of the final product;

    (vi) accessories of the final product cleared alongwith such, final product, the value of which is included in the assessable value of the final product.

    Explanation. - For the purposes of this sub-rule, it is hereby clarified that the term ''inputs'' refers only to such inputs as may be [Emphasisspecified in a notification used' under Rule 57A". supplied]

  4. We observe that Rule 57B commences with a non obstante clause. It allows credit to be taken by a manufacturer on inputs used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final products or not. There is no qualification as to where the inputs must be used in the main body of sub-rule (1). Qualifications have been introduced to the extent stated in Clauses (i) to (vi) read with the Explanation. Thus Clause (i)...

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