1999 (8) TMI 322 - AT - Central Excise

Summary

Issues:
1. Entitlement to benefit of Modvat credit for Hydraulic Excavator used in Mines.
2. Treatment of Mines as an adjuncant to the factory for Modvat credit.
3. Referral of questions to High Court regarding Modvat credit on capital goods for cement manufacturing.

Issue 1: Entitlement to benefit of Modvat credit for Hydraulic Excavator used in Mines
The Tribunal considered whether the appellants were entitled to Modvat credit for a Hydraulic Excavator used in mining lime stones adjacent to the factory. The appellants argued that the Hydraulic Excavator was integral to the manufacturing process of cement as it was used to excavate lime stones for crushing and subsequent use in cement production. They contended that the Hydraulic Excavator should be treated as capital goods under Rule 57Q of the Central Excise Rules. However, the Revenue authorities and the Tribunal rejected this argument, stating that mines were independent under the Factories Act and the Hydraulic Excavator used in the Mines could not be considered as capital goods for Modvat credit.

Issue 2: Treatment of Mines as an adjuncant to the factory for Modvat credit
The appellants sought to establish that mining activities should be treated as an adjuncant to the factory for the purpose of claiming Modvat credit on capital goods used in cement manufacturing. They argued that the entire process, from mining lime stones to using them in cement production, was integrally connected with the manufacture of cement. However, the authorities maintained that mines were independent entities under the Factories Act, and the Tribunal upheld this view by denying Modvat credit for the Hydraulic Excavator used in the Mines.

Issue 3: Referral of questions to High Court regarding Modvat credit on capital goods for cement manufacturing
The appellants requested the Tribunal to refer certain questions to the High Court of Andhra Pradesh regarding the entitlement to Modvat credit for capital goods used in cement manufacturing. The Tribunal, considering the direction from the High Court in a previous case, decided to refer questions related to the definition of 'Mine' as a 'Factory' for claiming Modvat credit, the commencement of the cement manufacturing process from the stage of excavation of lime stone, and the eligibility of Modvat credit for a Hydraulic excavator as capital goods under Rule 57Q of the Central Excise Rules to the High Court for consideration.

In conclusion, the Tribunal allowed the reference application and directed the Registry to refer the matter to the High Court of Andhra Pradesh at Hyderabad for further examination in accordance with the Central Excise & Salt Act, 1944.