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BIRLA CORP. v U.O.I. - CEA Case No. 02877 of 2005  RD-RJ 751 (7 February 2007)
D.B.CENTRAL EXCISE APPEAL NO.2877/05 (DR.J)
BIRLA CORP. VS. U.O.I.
DATE OF ORDER 7/2/2007
HON'BLE SHRI RAJESH BALIA, J.
HON'BLE SHRI CHATRA RAM JAT, J.
Mr.Rajendra Mehta, for the appellant.
Mr.Vineet kumar Mathur, for U.O.I.
Defects pointed out by the office have been removed. The appeal may now be registered.
Heard learned counsel for the parties.
The following substantial questions of law arise for consideration in this appeal:
"(i) Whether in the facts and circumstances of the case, the appellant is entitled to avail Modvat credit in respect of capital goods used at captive mine site, production of which is exclusively used by the appellant for its manufacturing purposes?
(ii) Whether in the facts and circumstances of the case, the appellant is entitled to avail Modvat credit in respect of inputs used at captive mine site, production of which is exclusively used by the appellant for its manufacturing purposes?"
The principal question which had arisen in this case is that where the manufacturer owns captive mines, the mineral won from which is used exclusively by the manufacturer as raw material, whether the inputs used at the mine sites, the capital goods, its spare accessories are eligible for availing Modvat credit in respect of duty paid thereon by the manufacturer.
It has been brought to our notice that the very same questions fell for consideration before this Court in D.B.Other Tax
Reference No.46/2003 decided on 9th March, 2006.
The back drop of issue is that the Tribunal has allowed the claim of the assessee to avail the modvat credit in respect of inputs used at mine sites following the decision in Jaypee Rewa Cement vs.
CCE reported in 2001 (133) ELT 3 (SC). However, it disallowed the claim to modvat credit in respect of all capital goods used at mine sites.
Hon'ble Supreme Court in its later decision in J.K.Udaipur
Udyog Ltd's case 2004 (7) SCC 344 had distinguished the decision in
Jaypee Rewa Cement's case and had disallowed the modvat credit in respect of inputs and capital goods used at captive mines. All the commodities mentioned in question relates to capital goods used at captive mines of the appellant.
However, by later decision on reference being made in M/s
Vikram Cement in 2006 (2) SCC 351, it was held that the view taken in
J.K.Udaipur Udyog Ltd's case about dis-allowability of modvat credit on duty paid on inputs and capital goods at captive mines in J.K.Udaipur
Udyog's case was erroneous and in that case the inputs used at mine sites were held eligible for availing modvat credit in respect of duties paid on such inputs.
By another decision in Birla Corporation's cas 2005 186 ELT 266 it was held that the conveyor belt through which raw material excavated from mines is transported to factory site is a part of factory and such conveyor belts and crushers are eligible for availing modvat credit on the duties paid on such capital goods.
By a later decision in Civil Appeal No.119/2005, M/s Vikram
Cement vs. Commissioner of Central Excise-I and other connected appeals decided on 16th February, 2006, the Supreme Court held that modvat credit in respect of capital goods used at captive mines will be available to the assessee. It was stated that the question of allowability of modvat credit on duties paid on capital goods at captive mines is also governed by the ratio laid down in the earlier Vikram Cement's cas 2006
(194) ELT 3, and the Court said that:-
"As regards the Modvat/Cenvat credit on capital goods, if the mines are captive mines so that they constitute one integrated unit together with the concerned cement factory, Modvat/Cenvat credit on capital goods will be available to the assessee. On the other hand, if the mines are not captive mines but they supply to various other cement companies of different assessee, Modvat/Cenvat credit on capital goods used in such mines will not be available to the concerned assessee under the appropriate
Modvat/Cenvat Rules. The matters are remanded to the respective original authorities for decision only on the above issue."
Keeping in view the aforesaid decisions and considering that it was not disputed that the capital goods were used at captive ines only, the availability of modvat credit on duties paid on such capital goods and inputs is squarely covered by the aforesaid decisions in
Vikram Cement's case.
In the aforesaid circumstances, this appeal deserves to be allowed which relates to dis-allowance of the modvat credit by the
Tribunal on capital goods used in mines by holding that assessee is entitled to avail the modvat credit in respect of capital goods and inputs used at captive mines, raw material excavated from which is used exclusively by the assessee for its own use and is not sold to other parties.
(CHATRA RAM JAT), J. (RAJESH BALIA), J.
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