2002 (7) TMI 169 - AT - Central Excise

Summary

Issues:
1. Eligibility of Modvat credit on capital goods used in mines under Rule 57Q of Central Excise Rules, 1944.
2. Interpretation of the definition of 'factory' and 'precincts thereof' under Section 2(e) of the Central Excise Act, 1944.

Issue 1: Eligibility of Modvat credit on capital goods used in mines under Rule 57Q of Central Excise Rules, 1944:
The case involved the appellants, who manufactured cement and clinker and were issued a show cause notice for allegedly availing Modvat credit on capital goods used in mines. The Assistant Commissioner disallowed the credit and imposed a penalty, which was partly set aside by the Commissioner (Appeals). The appellants argued that Modvat credit on capital goods used in mines should be admissible under Rule 57Q. However, the Tribunal referred to a Supreme Court judgment in M/s. Jaypee Rewa Cement, which held that such credit would not be admissible. The Tribunal dismissed the appeal based on this legal position, upholding the decision of the Commissioner (Appeals).

Issue 2: Interpretation of the definition of 'factory' and 'precincts thereof' under Section 2(e) of the Central Excise Act, 1944:
The appellants contended that the capital goods used in the mines were eligible for Modvat credit as they were within the precincts of the factory, citing a site plan showing the factory, mining area, and crusher connected by a conveyor belt. However, the Original Authority relied on the definition of 'factory' as per Section 2(e) of the Central Excise Act, emphasizing premises and precincts. The Authority referred to the Supreme Court judgment in M/s. Grauer & Well (India) Ltd. v. C.C.E., Baroda, which clarified the meaning of 'premises' and 'precincts.' Additionally, the Tribunal cited a judgment in the case of M/s. Madras Cement Ltd. v. CCE, Hyderabad, which emphasized that mining activities are not integral to the manufacturing process of cement. The Tribunal also mentioned conflicting decisions, such as C.C.E., Chennai v. Pepsico India Holdings Ltd. and India Cements Ltd. v. C.C.E., Hyderabad, but ultimately upheld the Commissioner (Appeals) decision based on the Supreme Court judgment in M/s. Jaypee Rewa Cement and the Tribunal's decision in the case of Madras Cements Ltd. v. CCE, Hyderabad.

This detailed analysis of the judgment highlights the issues of Modvat credit eligibility on capital goods used in mines under Rule 57Q and the interpretation of the 'factory' and 'precincts thereof' definition under the Central Excise Act, providing a comprehensive understanding of the legal reasoning and decisions involved in the case.