1. The dispute in this case relates to the admissibility of the following items for Modvat credit on capital goods :- I have heard Shri Sanjay Khatri, ld. Advocate for the appellants and Shri A.M. Tilak, ld. D.R. for the Revenue.
2. Credit on blow bars has been denied in the original order on the observation that these are used in the mines for crushing limestone, that Rule 57Q permits benefit to be taken where the capital goods are used in the factory. The Commissioner (Appeals) up-held this contention relying upon the judgment of the Tribunal in the case of Madras Cement Ltd. v. Collector of Central Excise reported in 1998 (99) E.L.T. 395.
In this judgment, the Tribunal had held that the manufacture of cement could be taken to start only at the stage where the raw-materials are brought into factory. It was, therefore, held that the processes of mining could not be taken to be the process of manufacture of cement.
Ld. Advocate relies upon the Tribunal's judgment in the case of A.C.C.Ltd. reported in 1991 (55) E.L.T. 415 in which the Tribunal, relying upon the judgment of the Supreme Court in the case of Indian Corporation Ltd. had held that explosives used in the mines were permissible as inputs, if the same manufacturer was engaged in the mining as well as production of cement. This judgment, which was not cited before the Tribunal in the Madras Cement case, being based on Supreme Court judgment pronouncing the law on this very subject, has to be preferred over the latter judgment. It is, therefore, to be held that if the present appellants were engaged both in mining and in production of cement, the benefit could be available. However, the observation of the Assistant Commissioner that the mines are not part of the factory, will have to be gone into. The definition of factory, as made in Section 2(e), not only covers the premises but also includes the precincts thereof. The scope of this term has been examined by the Tribunal in their judgment in the case of Superintending Engineer v.C.C.E. reported in 1992 (59) E.L.T. 610. In this judgment, the Tribunal, after examining the case law, had held that the word "premises" cannot be restricted to buildings, but it covers open land also.
However, there are other judgments, which lay down the conditions in which the proximity of the land to the factory has to be judged. In the case of Diamond'Cement reported in 1994 (71) E.L.T. 514, the Tribunal had ruled that the distance between two units would be a material factor for determining whether an area was located in the precincts of the factory or not. In neither of the lower proceedings, this aspect has been covered. Since this is a question of fact, it can be determined only on inspection of the location of the mines vis-a-vis the factory. On this count, the matter will have to be referred back to the original authority.
3. As regards stranded wire and bottom covers, the ground for denial is that these are used for transportation of the material and do not contribute to any process of production. In holding so, the Assistant Commissioner has relied upon the TELCO judgment reported in 1994 (70) E.L.T. 75. The Commissioner in his order has observed that the item is on par with the blow bars. Ld. DR., during his submissions, maintained that the conveyor system in which these goods are used, is immovable property and, therefore, the limitation imposed by Rule 57D, would apply. Ld. Advocate counters the arguments by saying that this is not a ground raised in the show cause notice and cannot be taken at this stage.
4. I find that the cited judgment relates to the interpretation of Notification No. 217/86 and the ratio thereof cannot be applied in the present proceedings. In this case also question of fact is involved and that is, whether the area where the conveyer is situated is in the precincts of the factory or not.
5. As regards the merits of the admissibility of this item, I find that the limestone to be transported to area in which they are to be processed, otherwise no manufacturing can be commenced. For the eligibility of these items also, the matter will have to be sent back to the Assistant Commissioner.
6. As regards white K. Accomon L.C. & Fire Crete super, the observation of the Assistant Commissioner is that whereas the explanation permits refractories under this Chapter 69, goods falling under Chapter 38 would not qualify. The Commissioner also has up-held this logic.
However, in neither order it is apparent as to what these goods are and in what way they are used in the factory of manufacture. In the absence of factual data, no orders can be passed on their admissibility or otherwise. If these goods are in the nature of refractories and if the relevant machinery cannot function in their absence, then such goods can be called as parts or accessories of such a machinery like a kiln.
But in the absence of factual data, no pronouncement can be made at this stage.
7. With these observations, I allow this appeal, set aside the lower orders and remand the proceedings back to the Assistant Commissioner, who will give reasoned order based on the observations made above, if necessary, after calling the assessees for hearing.