Commissioner of Cus. and C. Ex. Vs. India Cements Ltd. - Court Judgment

Excerpt:
1. this is a revenue appeal against the order-in-appeal no. 491/96, dated 28-11-1996 by which the commissioner (appeals) allowed the modvat credit in respect of several items. the revenue is aggrieved in so far as the grant of modvat credit only in respect of excavators falling under heading 8429.00 and dumpers falling under heading 8704.00. both these items were treated by the commissioner (appeals) as capital goods falling under rule 57q of the central excise rules and allowed modvat credit to the extent of rs 20,21,050/-. the revenue is aggrieved of this order and in so far as these two items are concerned contend that the credit of duty paid on capital goods is permissible, subject to its use in their factory for the purpose of producing or processing of any goods for the manufacture.....

Judgment:
1. This is a revenue appeal against the Order-in-Appeal No. 491/96, dated 28-11-1996 by which the Commissioner (Appeals) allowed the Modvat credit in respect of several items. The revenue is aggrieved in so far as the grant of Modvat credit only in respect of excavators falling under Heading 8429.00 and dumpers falling under Heading 8704.00. Both these items were treated by the Commissioner (Appeals) as capital goods falling under Rule 57Q of the Central Excise Rules and allowed Modvat credit to the extent of Rs 20,21,050/-. The revenue is aggrieved of this order and in so far as these two items are concerned contend that the credit of duty paid on capital goods is permissible, subject to its use in their factory for the purpose of producing or processing of any goods for the manufacture of final goods. It is contended that the excavators and dumpers are not used within the precincts of the factory and which are used in the mines and the mines cannot be considered as a factory, in view of the specific definition of the factory given in Section 2(e) of the Central Excise Act. Reference is also made to the definition of the factory as appearing under Section 2(m) of the Factories Act, 1948, which also excludes the mines from the definition of the factory. It is contended by the revenue that these excavators and dumpers are used solely for lifting or transportation of the limestone from the mines and not for producing or processing of any goods. It is also contended that the limestones are not dutiable product and therefore the Commissioner (Appeals) order in so far as granting Modvat credit in respect of these two items impugned as capital goods required to be reversed.

2. The learned SDR appearing for the revenue contended that the issue is no longer res Integra and the Tribunal in the case of Madras Cements Ltd. as reported in 1998 (99) ELT 395 categorically laid down that hydraulic excavators used in mine adjacent to factory for mining lime -stone used in manufacture of cement not an integral part of manufacture of cement. Therefore, the Tribunal held that the same can not be treated as capital goods and held that the denial of Modvat credit is justified. She further submits that as the issue squarely applies to the facts of the present case, therefore, the appeal of the revenue is required to be allowed.

3. On the other hand, Shri C. Rao, learned Consultant submits that the Tribunal in the case of Jaypee Rewa Cement v. CCE as reported in 1999 (85) ECR 174 held that explosives used for quarrying of limestone were entitled for the benefit of Modvat credit, on the basis of the ratio of the judgment rendered in the case of Indian Rayon & Industries Ltd. v.CCE as reported in 1995 (76) E.L.T. 558 and that of CCE v. New Vikram Cement's as reported in 1997 (95) E.L.T. 98. He points out that the Bench of Northern Regional Bench did not follow the ratio of the decision in the case of Madras Cements Ltd. rendered by the Southern Regional Bench. He points out to the judgment in the case of Shree Cement Ltd. v. CCE (Single Member of Northern Bench) as reported in 1999 (107) E.L.T. 223 (T), wherein also it has been held that below bar used in mines for crushing limestone is entitled for the benefit of credit. He points out that in the case of Travancore Cement Ltd. v. CCE as reported in 1998 (103) E.L.T. 260 (T), the Tribunal has held that open yard within the precincts of the factory has to be treated as precincts of the factory under the definition of the 'factory', as appearing under Section 2(e) of the Central Excise Act. He also refers to the judgment of Larsen & Toubro Ltd. as reported in 1998 (101) E.L.T. 131 (T) wherein it was held that material handling equipments for e.g. fork lift trucks, conveyor systems, EOT crane are eligible for Modvat credit, as they are all used in the manufacture of final product.

4. In counter, the learned SDR contends that all the judgments are clearly distinguishable as they do not pertain to excavators and dumpers used within the precincts of the mines. In all the cited cases, the equipments were used in the precincts of the factory, hence the Tribunal held that the Modvat credit is required to be extended. The learned SDR points out that in the present case, admittedly mines were outside the precincts and away from the factory and dumpers and excavators were used for excavating limestones within the precincts of mines, which cannot be treated as part of the factory within the definition of 'factory' defined under Section 2(e) of the Central Excise Act.

5. On a careful consideration of the submissions on both sides, we agree with the submission of learned SDR that the above cited judgments by the learned Consultant are all distinguishable, as in those cases, the items were used within the precincts of the factory, while in the present case excavators and dumpers were used in the precincts of mines and mines are excluded from the definition of 'factory', as appearing under Section 2(e) of the Central Excise Act. We find that the Tribunal has already considered this issue in the case of Madras Cements Ltd. cited supra and the issue has been clearly gone into in detail and held that dumpers which are used within the precincts of mines cannot be considered as capital goods for the purpose of grant of Modvat credit.

Therefore, the ratio of the Madras Cements Ltd. directly applies to the facts of the present case and applying the said ratio to the present case, the impugned order of the Commissioner in so far as the two items is required to be set aside and the appeal of the revenue is to be allowed. Ordered accordingly.