2018 (3) TMI 624 - AT - Central Excise

CENVAT credit - the respondents have been supplying inferior quality limestone excavated from the mines to others, so the said mines cannot be said to be captive mines of the respondent - Held that - The waste in the mines has to be disposed for further excavation and convenience. Further, the respondent has obtained permission from Government of Tamil Nadu to dispose of the waste / inferior quality limestone to nearby industries. Such a disposal of waste will not make the mines non-captive mines - appeal dismissed - decided against Revenue.

Summary

Issues:
- Eligibility of credit for capital goods used in mines outside the factory
- Interpretation of "captive mines" for availing credit

Analysis:
1. The case involved a dispute regarding the eligibility of availing credit for capital goods used in mines located outside the factory. The Central Excise Department issued a show cause notice to recover the credit previously availed by the respondents, alleging their ineligibility. The original authority confirmed the demand, interest, and penalties, which were later set aside by the Commissioner (Appeals), leading the department to appeal before the Tribunal.

2. The department argued that the respondents' mines could not be considered captive mines as they were supplying inferior quality limestone to non-cement manufacturers, making them ineligible for credit. Citing the decision in the case of Vikram Cement, the department contended that credit on capital goods is not admissible if the mines are not captive. The Apex Court in the Vikram Cement case held that for credit eligibility, mines must constitute one integral unit with the cement factory and not supply limestone to other cement factories.

3. On behalf of the respondent, it was argued that the mines were indeed captive mines as they had permission to dispose of inferior quality limestone to nearby industries, as per Government regulations. The respondent had been selling only waste or inferior quality limestone unsuitable for cement production to non-cement manufacturers, in accordance with the permission granted. The Commissioner (Appeals) had correctly analyzed the situation, considering the disposal of waste as per regulations, and ruled in favor of the respondent.

4. After hearing both sides, the Tribunal rejected the department's argument that the mines were not captive due to the disposal of waste outside the mines. The Tribunal found merit in the respondent's compliance with regulations and disposal of unsuitable limestone to non-cement manufacturers as per permission granted by the Government. The Tribunal concluded that the decision in the Vikram Cement case was not applicable in this scenario, as the respondent's actions aligned with the regulations and did not breach the conditions for credit eligibility. Consequently, the department's appeal was dismissed, and the cross-objection by the assessee was disposed of.

This detailed analysis of the judgment highlights the key arguments presented by both parties and the Tribunal's reasoning in determining the eligibility of credit for capital goods used in mines outside the factory, emphasizing the interpretation of "captive mines" in the context of availing such credit.