TMI Blog2006 (1) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... All the appeals and special leave petitions will now be listed for being disposed of in the light of this judgment. - 1197 of 2005 - - - Dated:- 18-1-2006 - Ruma Pal, B.N. Srikrishna and Dalveer Bhandari, JJ. [Judgment per : Ruma Pal, J]. - The question whether the decision in Jaypee Rewa Cement v. CCE - 2001 (133) E.L.T. 3 (S.C.) 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) E.L.T. 289 (S.C.) 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) E.L.T. 289 needs reconsideration". 2.The reference w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) provides for inputs which are manufactured and used within the factory of production. Paints, fuel, packing materials and accessories are also treated as inputs under clauses (ii), (iii), (v) and (iv) without any requirement for user within the factory. Clause (iv) provides for credit on inputs used for generation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take credit under sub-rule (1) only if the intermediate products are manufactured in a factory as a job work in respect of which the exemption contained in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 214/86-Central Excises, dated the 25th March, 1986 has been availed of". xxxxxxxxxxxx [Emphasis supplied] 8.This Rule allows credit on inputs used in manufacture of intermediate products described in Column 3 of the Table provide the intermediate products are received by the manufacturer for use in or in relation to the manufacture of final products described in the corresponding entry in Column 4 of the Table. Explosives, limestone and cement are admittedly covered by Columns 1, 2 and 3 respectively of the Table. 9.It may be noted at this stage that Rule 57J(2) was explained by a Trade Notice. No. 38/1999 dated 2nd April, 1991 issued by the Bombay Collectorate. It was said :- "the basic aim of the Modvat Scheme is to avoid the cascading effect of duties on a product. Therefore, the scheme permits Modvat credit on all goods forming a part of the final product, though the final product may be manufactured in several stages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of intermediate products received by the manufacturer for use in or in relation to the manufacture of final product, then all such products on which duty has been paid credit will be allowed ................ Explosives would fall under column (2) being a tariff item in Chapter 36; the intermediate product, namely, lime stone would fall under column 3 being covered by Chapter 25; and the final product, namely, cement would also fall under Chapter 25 and would fall under column 4. The reading of Rule 57J along with the aforesaid notification can leave no manner of doubt that even in respect of inputs used in the manufacture of intermediate product which product is then used for the manufacture of the final product. The manufacturer would be allowed credit on the duty paid in respect of the input. On the explosives a duty had been paid and the appellants would be entitled to claim credit because the explosives were used for the manufacture of the intermediate product, namely, lime stone which, in turn, was used for the manufacture of cement". 12.The appeal of the manufacturer was accordingly allowed and it was held that the Modvat was allowable on the use of the explosives in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived in the factory on or after 1st April, 2000. Credit is therefore permissible in respect of intermediate goods received from a job worker on or after 1-4-2000. Credit shall, of course, be allowed only if the intermediate products received by the manufacturer of the said final products are accompanied by any of the documents as specified under rule 57AE(1) evidencing the payment of duty on such inputs of capital goods". [Emphasis supplied] 17.Consequently, with the intention of re-introducing the benefit granted earlier under Rule 57J, Rule 57AB was introduced under the heading "Cenvat credit". The material extracts of Rule 57AB reads as follows :- 57AB(1) A manufacturer or producer of final products shall be allowed to take credit (hereinafter referred to as the Cenvat credit) of. - (i) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the said First Schedule), leviable under the Act; (ii) xxxxxxxxx (iii) xxxxxxxxx (iv) xxxxxxxxx (v) xxxxxxxxx paid on any inputs or capital goods received in the factory on or after the first day of March, 2001, including, the ..... 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