Commissioner of Central Excise and Service Tax, Tiruchirapalli vs India Cements Ltd.

R. Sudhakar, J—The Department, aggrieved by the order of the Tribunal in holding against the Department in a claim for benefit of Modvat credit on lubricants used in the mines of the respondent, who are manufacturers of cement, is before this Court by filing the present appeal. This Court, admitted the appeal by framing the following substantial questions of law for consideration:-

"(1) Whether the Hon''ble CESTAT is right in extending credit of duty paid on the lubricants used in the mines, lying outside the factory of the assessees, in respect of which the assessees were not having mining leases for the disputed period, i.e., from April, 1996 to March, 2000 and, therefore, the mines are not captive mines in the sense it is held in the case of Vikram Cement Vs. Commnr. of Central Excise, Indore, (2006) 194 ELT 3 : (2006) 1 JT 385 : (2006) 1 SCALE 327 : (2006) 2 SCC 351 : (2006) 1 SCR 465 : (2006) AIRSCW 362 : (2006) 1 Supreme 288

(2) Whether the Hon''ble CESTAT is right in extending credit of duty paid on the lubricants used in the mines, lying outside the factory of the assessees, in the absence of the proof provided by the assessees that the mines are captive mines on applying the ratio of the decision in the case of Vikram Cement Vs. Commnr. of Central Excise, Indore, (2006) 194 ELT 3 : (2006) 1 JT 385 : (2006) 1 SCALE 327 : (2006) 2 SCC 351 : (2006) 1 SCR 465 : (2006) AIRSCW 362 : (2006) 1 Supreme 288 , wherein the Supreme Court has laid down that if the mines are not captive mines but they supply to various other cement companies of different assessees, Modvat/Cenvat credit on capital goods used in such mines will not be available to the concerned assessee under the appropriate Modvat/Cenvat Rules?

(3) Whether by virtue of a specific exclusion contained in Colurnn-2, viz. Heading of sub-heading Nos. 84.29 to 84.37 in Sl. No. 2 of Rule 57Q under which the description of surface miners, dumpers and roaders used in the mines for excavation etc., falls, the first respondent would be entitled to Cenvat credit as granted by the Tribunal?"

The case of the assessee relates to assessment years April, 1996 to March, 2000. The benefit was claimed by the assessee in terms of Rule 57Q of the Central Excise Rules. While the department rejected the claim of the assessee, on appeal by the assessee, the Commissioner (Appeals) set aside the said order of the Department. On further appeal by the Department, the Tribunal dismissed the appeal holding as under:-

"We have heard both sides. The rule as it stood at the material time covered lubricating oils as capital goods as per SI. No. 12 of the Rule. In the assessee''s own case reported in 2003 (150) E.L.T. 341, the Tribunal has held that capital goods used in the manufacturing process and outside the factory premises are eligible to credit during the relevant period under Rule 57-Q. The mines in which the lubricating oils are used for lubricating the machineries such as surface miner, dumper, etc., being captive mines of the assessees, credit has been rightly held to be admissible. We, therefore, uphold the impugned order and reject the appeal. The cross-objection is only in the nature of reply to/comments upon the Revenue''s appeal and is therefore dismissed."

Aggrieved against the order of the Tribunal, the Department is before this Court in the present appeal.

Learned counsel appearing for the Department/appellant contended that the mine in question is not a captive mine so as to constitute one integrated unit and the assessee had a mining lease granted by the Government of Tamil Nadu with effect from 3-2-2004 for a period of 20 years vide letter dated 21-9-2007. For better clarity, the relevant part of the grounds as raised in the appeal is set out hereunder:-

"A. The Hon''ble Tribunal by allowing the credit on the ground of use in the captive mines has followed the ratio of the decision of the Apex Court in the case of Vikram Cement Vs. Commnr. of Central Excise, Indore, (2006) 194 ELT 3 : (2006) 1 JT 385 : (2006) 1 SCALE 327 : (2006) 2 SCC 351 : (2006) 1 SCR 465 : (2006) AIRSCW 362 : (2006) 1 Supreme 288 , where credit of duty paid on capital goods used in the captive mines were allowed, wherein it was held that

".......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 assessees, Modvat/Cenvat credit on capital goods used in such mines will not be available to the concerned assessee under the appropriate Modvat/Cenvat Rules."

In this case the Tribunal has not recorded any finding to the effect that the appellant has proved that the mines are captive mines and the mined products are not supplied to other cement companies. The evidence available shows that the assessee has only mining lease granted by the Govt. of Tamil Nadu w.e.f. 3-2-2004 for a period of 20 years vide their letter dated 21-9-2007 addressed to the Supdt. of Central Excise, Ariyalur Range enclosing a declaration that the limestone mined has been captively consumed by them in their process to produce cement and not sold to outsiders. Hence the assessee were not having mining leases for the dispute period, i.e., from April, 1996 to March, 2000. Hence, the mined are not captive mines in the sense it is held in the case of M/s. Vikram Cements Ltd. Therefore, they are not eligible for credit on impugned capital goods ''lubricants'' used in the machinery like ''Surface Miner'' which were used in the excavation of limestone."

In support of this contention the learned counsel for the appellant relied upon a decision of the Supreme Court in Vikram Cement Vs. Commnr. of Central Excise, Indore, (2006) 194 ELT 3 : (2006) 1 JT 385 : (2006) 1 SCALE 327 : (2006) 2 SCC 351 : (2006) 1 SCR 465 : (2006) AIRSCW 362 : (2006) 1 Supreme 288 .

Heard the learned counsel appearing for the appellant, and the learned counsel appearing for the respondent. From the records, it is evident that a fact is in dispute, as has been raised by the Department. Further, the finding of the Tribunal that the mine of the assessee is a captive mine is not supported by any materials. In such view of the matter, this Court is unable to take a decision on the questions of law raised. In view of the dispute in fact and the finding rendered by the Tribunal, in the light of ground (a), raised by the appellant, which has been referred to supra, this Court is inclined to set aside the order of the Tribunal and remand the matter back to the Tribunal for reconsideration on the plea for Modvat/Cenvat credit claimed by the

Accordingly, without going into the substantial questions of law, the order of the Tribunal is set aside. This appeal is allowed by way of remand to the Tribunal for reconsideration of the plea of Modvat/Cenvat credit, claimed by the assessee. However, there shall be no order as to costs.