1999 (9) TMI 401 - AT - Central Excise

Summary

Issues:
- Grant of Modvat credit for excavators and dumpers used in mines
- Interpretation of the definition of 'factory' under the Central Excise Act

Analysis:
1. The appeal involved a dispute over the grant of Modvat credit for excavators and dumpers used in mines. The Commissioner (Appeals) allowed the credit, considering these items as capital goods under Rule 57Q of the Central Excise Rules. However, the revenue contended that these items were not used within the factory premises for the manufacturing process of dutiable goods, making them ineligible for the credit.

2. The revenue argued that previous tribunal decisions, such as the Madras Cements Ltd. case, supported their position that excavators used in mines adjacent to the factory were not integral to the manufacturing process of cement. Therefore, they claimed that denying Modvat credit was justified based on these precedents, as the excavators and dumpers were not part of the manufacturing process within the factory.

3. On the other hand, the respondents relied on cases like Jaypee Rewa Cement v. CCE to support their claim that certain equipment used in mines, such as explosives for quarrying limestone, were entitled to Modvat credit. They pointed out inconsistencies in tribunal decisions from different regions and emphasized that equipment used for specific purposes within the factory premises should be eligible for the credit.

4. The Tribunal analyzed the arguments presented by both sides and concluded that the excavators and dumpers used in the mines, which were outside the factory precincts, did not qualify as capital goods under the Central Excise Act's definition of 'factory.' Referring to the Madras Cements Ltd. case, the Tribunal held that equipment used outside the factory premises, like dumpers in mines, were not eligible for Modvat credit, as they were not directly involved in the manufacturing process within the factory.

5. In light of the precedents and the specific circumstances of the case, the Tribunal upheld the revenue's appeal, setting aside the Commissioner's order granting Modvat credit for excavators and dumpers used in the mines. The decision emphasized the importance of equipment being used within the factory premises for the manufacturing process to qualify for Modvat credit, in accordance with the definition of 'factory' under the Central Excise Act.