This is a reference under Section 35(H)(1) of the Central Excise Act examining the retrospective nature of substituted rules, eligibility of explosions used outside factory premises for Cenvat credit, and justification of CEGAT orders. The Court dismissed the reference.
The C.E.R.C. is dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE T.SUNIL CHOWDARY C.E.R.C.No.20 of 2003
JUDGMENT: (Per LNR,J)
This reference is made at the instance of the Department under Section 35 (H)(1) of the Central Excise Act, as it stood in the year 2003, with a request to direct the Customs, Excise & Gold (Control) Appellate Tribunal, South Zonal Bench, Banglore (for short ‘the Tribunal’) to refer the following questions to this Court:
1. Whether the substituted rules are retrospective or prospective?
2. Whether the explosives used outside the factory premises are eligible for Cenvat Credit under Rule 57AA(d).
3. Whether the orders of the Hon’ble CEGAT are justifiable under the changed rules.
The respondent is a manufacturer of cement. In the process of procuring raw material, the respondent uses explosives. The Government created a facility of Cenvat. According to them, if any raw material or item used in the process of manufacturing, has already suffered the duty, the same shall be taken into account in the context of determining the duty on the finished product. The respondent availed the Cenvat credit on the explosives to the extent of 17,396/- for the period from April 2000 to June 2000.
Alleging that the explosives were used outside the factory premises, and the same is not covered under Rule 57 AA(d) of the Central Excise Rules, 1944, a show cause notice was issued on 17.10.2000. The respondent replied
that the explosives used for procuring raw material can certainly go into the Cenvat. Not satisfied with the explanation, the Assessing Officer passed an order imposing liability. The matter ultimately landed before the Tribunal. It took note of the judgment of the Hon’ble Supreme Court in Jaypee Rewa Cements vs. Commissioner of Central Excise[1] and allowed the appeal. It is in this context that the reference is sought to be made.
Heard learned counsel for the applicant and learned counsel for the respondent.
The crux of the argument advanced on behalf of the applicant is that to qualify for inclusion under Cenvat, the raw material or other items must have been used within the factory premises. It is too difficult to accept this contention. In a given case, the factory may be compact and in a defined premises. However, if the manufacturing process is a complex one and involves usage of quite large amount of raw material and various processes, it is difficult to treat any particular area as the factory premises. Though the actual processing may take place in an area of few thousand square feet, the processing of raw material or storing thereof may occur in hundreds of acres of land. If explosives are used to procure raw material, which in turn is supplied to the factory, either through surface transport or through conveyor belt, it is difficult to segregate it from the factory premises. Once the issue is covered by the judgment of the Hon’ble Supreme Court, there is no point in seeking reference on this very question. At any rate, the amount involved is too meager. The C.E.R.C. is accordingly dismissed.
L.NARASIMHA REDDY, J
T.SUNIL CHOWDARY, J
Date: 24.09.2014 JSU
THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE T.SUNIL CHOWDARY
C.E.R.C.No.20 of 2003
Date: 24.09.2014
JSU
3 issues framed by the court
Whether the substituted rules are retrospective or prospective?
Whether explosives used outside factory premises are eligible for Cenvat credit under Rule 57AA(d)?
Whether the orders of the CEGAT are justifiable under the changed rules?
Colour shows how this judgement treated each authority
Jaypee Rewa Cements vs. Commissioner of Central ExciseDistinguished¶11
Jaypee Rewa Cements vs. Commissioner of Central Excise [1]
2 provisions across 2 enactments
Applicant Department
Respondent
L. Narasimha Reddy
T. Sunil Chowdary
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
