2003 (9) TMI 271 - AT - Central Excise

Summary

Issues involved:
Whether Modvat credit of duty paid on capital goods used in mines away from the factory is available under erstwhile Rule 57Q of the Central Excise Rules, 1944.

Analysis:

The appeals were filed by the Revenue to determine the availability of Modvat credit for duty paid on capital goods used in mines situated away from the factory. The Revenue argued that as per the Supreme Court's decision in a specific case, capital goods must be used in the factory to avail Modvat credit. They also referred to a Larger Bench decision which stated that capital goods used in mines outside the factory are not eligible. On the other hand, the respondents contended that the capital goods in question, such as conveyor belts, were used exclusively in the plant and not in the mines. They also cited a case where Modvat credit was allowed for ropeways partly inside and outside the factory. The respondents argued that the mine is an extension of the factory area and that the physical separation does not break the nexus between the mines and the factory.

The Tribunal considered both arguments and referred to the Larger Bench decision which held that Modvat credit is not available for capital goods used in mines outside the factory. The Tribunal also mentioned the Supreme Court's decision dismissing an appeal related to Modvat credit on capital goods used in mining areas. The Tribunal concluded that capital goods used in mines outside the factory are not eligible for Modvat credit, except for conveyor belts used exclusively in the plant. The appeals were disposed of accordingly, with no penalty imposed, as it involved the interpretation of the term "capital goods."

In summary, the judgment clarified that Modvat credit for duty paid on capital goods used in mines away from the factory is generally not available, except for specific cases where the capital goods are used exclusively in the plant. The decision was based on previous rulings and interpretations of the law regarding the eligibility of capital goods for Modvat credit.