2001 (10) TMI 786 - AT - Central Excise

Summary

Issues involved:
1. Modvat credit on HDPE bags used for dispatch of reprocessed cement.
2. Modvat credit on explosives and motors used in mines for excavating lime stones.
3. Modvat credit on lubricating oils used in excavating lime stones.
4. Modvat credit on capital goods used in mines and factory.

Issue 1: Modvat credit on HDPE bags for reprocessed cement:
The appellants sought Modvat credit on HDPE bags used for dispatching reprocessed cement under Rule 96ZV. The consultant argued that since the damaged cements were filled into HDPE bags and cleared on payment of duty, they are entitled to the credit. However, the Department disagreed, stating that since the reprocessed cement is cleared without duty payment, the credit on HDPE bags used for dispatch cannot be availed. The Tribunal upheld the Department's view, denying Modvat credit on HDPE bags, citing the earlier availed credit on sacks that were not subject to excise duty.

Issue 2: Modvat credit on explosives and motors for excavating lime stones:
Regarding explosives used in mines, the Apex Court judgment allowed Modvat credit under Chapter heading 36 as they are inputs on which duty has been paid and used in mining for excavating lime stones, a raw material for cement manufacture. The Tribunal followed the Apex Court's decision, permitting Modvat credit on explosives. However, Modvat credit on lubricating oils exclusively used in mines was denied as they were not linked to the final product, cement. Similarly, Modvat credit on capital goods exclusively used in mines was rejected, except for parts of conveyor belts used in both mines and factory.

Issue 3: Modvat credit on lubricating oils used in mines:
The Tribunal rejected Modvat credit on lubricating oils exclusively used in mines, as they were not considered relevant to the final product, cement.

Issue 4: Modvat credit on capital goods used in mines and factory:
For capital goods exclusively used in mines, Modvat credit was denied, except for parts of conveyor belts used in both mines and the factory. The Tribunal modified the Order-in-Appeal to allow Modvat credit only on parts of conveyor belts used in both locations.

In conclusion, the Tribunal allowed Modvat credit on explosives used in mines but denied credit on HDPE bags for reprocessed cement, lubricating oils exclusively used in mines, and most capital goods exclusively used in mines, except for parts of conveyor belts used in both mines and the factory.