Modvat Credit

I am agree with Mr. Ajay but only cement factory to allow take cenvat credit on without entering the materials

see the next analysis

Explosives used in mines away from factory - eligible for credit - JK Udaipur is not good law; rules Apex Court

NEW DELHI, Jan 23, 2006 : WE had predicted it on 11.9.2004 while reporting J.K. Udaipur case – 2004-TIOL-73-SC-CX, TIOL had said “Is every thing lost? Not necessarily. The Apex Court can be approached in another case and this time with full history and goals of legislation” and that is what exactly happened.

A little bit of history. In the Jaypee Rewa case – 2002-TIOL-97-SC-CX, the Supreme Court held that inputs need not be utilised only within the factory premises and that explosives used in the mines away from the factory were eligible for Modvat credit. J.K. Udaipur overruled this decision on the ground that even though this was permissible under the old Modvat Rules it was not permissible under the new Cenvat Rules. We had then pointed out that the history of the legislation was not brought to the Supreme Court’s notice and what had changed between the Modvat Rules and Cenvat Rules was only a comma and not the concept. We had also pointed out that the Cenvat Credit Rules were more liberal than the Modvat Rules.

On 5-09-2005 we had reported the Jaypee Rewa had bounced back to life with a division bench of the Supreme Court referring the J.K. Udaipur case to a larger bench.

Now the larger bench in Vikram Cement Vs Commissioner of Central Excise, Indore, last week emphatically held that J.K. Udaipur is not good law and the decision in the Jaypee Rewa case will continue to apply. The Supreme Court held

1) That the Modvat Rules and the Cenvat Rules were not entirely different; there was only a rearrangement of the provisions; in fact the Cenvat Rules are more broad based.

2) In the J.K. Udaipur case the provision of Rule 57AB corresponding to old Rule 57J of the Modvat Rules was overlooked.

These two cases Jaypee Rewa and J.K. Udaipur were referred to in several cases and Tribunal had passed many orders based on these decisions. What will happen to all those cases?

And is the future bright? Hopefully, if the government does not take the case again to the Supreme Court on the ground that what has now been decided is with reference to the Cenvat Credit Rules of 2000 vis-a-vis the old Modvat Rules but they would not apply to the Cenvat Credit Rules, 2001, 2002 and 2004.

There is another problem. In J.K. Udaipur, one of the grounds for denying credit was that the assessee cannot be his own job worker. This issue is not at all touched in the present case. Let us hope there would be no further litigation and the government would graciously allow credit for the inputs used in the mines.