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The Madras High Court has allowed Cenvat input credit on the furnace oil used in the manufacture of such D.B.M., an exempt intermediate product, which was stock-transferred to the other unit where it was used in the manufacture of final dutiable goods.
The Court in Tata Refractories Ltd. v. Commissioner observed the following:
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Term ‘within the factory of production’ in the definition of ‘input’ under Rule 57AA(d) is to be interpreted liberally to include the other/second unit.
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If the expression ‘within the factory of production’ is interpreted strictly and narrowly to mean that every stage of manufacture must take place within the same factory premises, anomalous consequences would follow.
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No consideration of any sort was involved in the clearance of the intermediate product from the first unit to the second unit.
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Owners of the units were same, and the balance sheet was common for both. There was no sign of any trade, even the clearance bills specified stock-transfers.
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Reliance was placed on Supreme Court’s decision in Escorts Limited while Department’s reliance on another decision in Ballarpur Industries was found to be misplaced.
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