2015 (9) TMI 148 - HC - Central Excise

Benefit of Modvat credit - credit on lubricants used in the mines of the respondent - Held that - It is evident that a fact is in dispute, as has been raised by the Department. Further, the finding of the Tribunal that the mine of the assessee is a captive mine is not supported by any materials. In such view of the matter, this Court is unable to take a decision on the questions of law raised. In view of the dispute in fact and the finding rendered by the Tribunal, in the light of ground (a), raised by the appellant, i.e. Tribunal by allowing the credit on the ground of use in the captive mines has followed the ratio of the decision of the Apex Court in the case of Vikram Cements Ltd. - Vs CCE, Indore (2006 (2) TMI 1 - Supreme court), where credit of duty paid on capital goods used in the captive mines were allowed, this Court is inclined to set aside the order of the Tribunal and remand the matter back to the Tribunal for reconsideration on the plea for modvat/cenvat credit claimed by the assessee. - Order of Tribunal is set aside - Decided in favour of Revenue.

Summary

Issues involved:
1. Claim for benefit of Modvat credit on lubricants used in mines.
2. Extending credit of duty paid on lubricants used in mines outside the factory.
3. Entitlement to Modvat credit as granted by the Tribunal.
4. Captive mines and eligibility for credit on capital goods.
5. Dispute regarding whether the mine is a captive mine.

Issue 1: Claim for benefit of Modvat credit on lubricants used in mines
The Department appealed against the Tribunal's order granting Modvat credit on lubricants used in the respondent's mines. The Tribunal upheld the credit, citing Rule 57Q of the Central Excise Rules. The Tribunal considered the lubricating oils as capital goods, eligible for credit during the relevant period. The Tribunal deemed the mines as captive mines of the assessee, making the credit admissible. The Department challenged this decision in the High Court.

Issue 2: Extending credit of duty paid on lubricants used in mines outside the factory
The Department contended that the mine in question was not a captive mine, as it did not constitute one integrated unit with the cement factory. The Department argued that the assessee did not prove the mines were captive and that the mined products were not supplied to other cement companies. The Department highlighted that the assessee only had a mining lease granted by the Government of Tamil Nadu, and thus, the mines were not captive during the disputed period. The Department relied on a Supreme Court decision to support its contention.

Issue 3: Entitlement to Modvat credit as granted by the Tribunal
The Tribunal granted the Modvat credit on lubricants used in the mines, considering them as capital goods eligible for credit under Rule 57Q. The Tribunal emphasized that the mines were captive mines of the assessee, leading to the admissibility of the credit. The Department appealed against this decision, arguing that the Tribunal did not establish that the mines were captive and that the assessee did not have mining leases during the disputed period.

Issue 4: Captive mines and eligibility for credit on capital goods
The Department raised concerns about the classification of the mines as captive, emphasizing that the assessee's mining lease did not cover the disputed period. The Department argued that without proof of the mines being captive, the assessee was not entitled to credit on capital goods like lubricants used in the machinery for excavation.

Issue 5: Dispute regarding whether the mine is a captive mine
The High Court noted a factual dispute raised by the Department regarding the classification of the mine as a captive mine. The Court found that the Tribunal's finding that the mine was captive lacked supporting evidence. Due to this factual dispute and lack of evidence, the Court set aside the Tribunal's order and remanded the matter back for reconsideration on the plea for Modvat/Cenvat credit claimed by the assessee.

Overall, the High Court allowed the appeal by way of remand to the Tribunal for further consideration without delving into the substantial questions of law, emphasizing the need for clarity on the captive nature of the mines before granting Modvat credit on capital goods used in the mines.