2004 (97) ECC 328 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(B)

Shri V.K. Agrawal, Member (T) and Shri P.G. Chacko, Member (J)

Hindustan Zinc Limited

Versus

CCE, Jaipur-II

Appeal No. E-1468/03-NB(B)

[Arising out of Order-in-Appeal No. 78(AKD) CE/JPR-II/2003 dated 2.4.2003 passed by the Commissioner of Central Excise (Appeals), Jaipur]

Final Order No. 547/2004-B, dt. 16.2.2004, Certified on 19.7.2004

Words Meaning

"Factory " -- The mere fact that the mines, which are underground and the factory where the concentration plant is located, both are owned by the appellants, does not make the mines a part of the factory premises -- Sec. 2(f) of CEA.

Modvat on inputs

The capital goods, which are used in the mines which are located underneath the factory premises, are not eligible for the Modvat Credit under Rule 57Q of the Central Excise Rules -- Jaypee Rawa Cement v. CCE, 2001 (77) ECC 57 (SC).

PRESENT :

Shri V. Lakshmikumaran, Adv. for the appellant.

Shri V. Valte, SDR for the respondent.

Cases Cited :

1. Ardeshir H. Bhiwandiwala v. State of Bombay, AIR 1962 SC 29......................... [Para 4]

2. CCE, Hyderabad v. India Cements Ltd., 2000 (118) ELT 700 (Tri)...................... [Para 3]

3. CCE, Jaipur v. Hindustan Zinc Ltd., 2001 (127) ELT 438................................... [Para 2]

4. Dhampur Sugar Mills Ltd., 2001 (129) ELT 73............................................. [Paras 2, 5]

5. Hindustan Zinc Ltd. v. CCE, Jaipur, 2002 (147) ELT 989 (Tri)............................ [Para 2]

6. India Cements Ltd. v. CCE, 2002 (147) ELT 393............................................... [Para 3]

7. J.K. Sugar v. CCE, Kanpur, 2000 (125) ELT 542.............................................. [Para 3]

8. Jaypee Rawa Cement v. CCE, 2001 (77) ECC 57 (SC) (Followed)................... [Para 2, 3]

9. Rollatainers Ltd. v. CCE, 2002 (150) ELT 383 (T).............................................. [Para 2]

10. Union of India v. Hindustan Zinc Ltd., 2002 (142) ELT 289 (Raj.)...................... [Para 2]

11. Vikas Industrial Gas v. CCE, Allahabad, 2000 (70) ECC 256 (Tri-LB)............... [Para 3]

Per : V.K. Agrawal

The issue involved in this appeal, filed by M/s. Hindustan Zinc Ltd., is whether Modvat Credit of the duty paid on capital goods used in the mines, is available to them.

2. Shri V. Lakshmikumaran, learned Advocate, submitted that the appellants are engaged in the manufacture of lead and zinc ores, which are being transferred mainly to their smelters for being subjected to smelting process for manufacture of non-ferrous metals and their by-products; that the mining is being done within the factory premises approved by the Department and, therefore, the capital goods, in question, are being used within the factory premises and not outside the factory; that it has been held in their own case as reported in 2002 (147) ELT 1185 (Tri) that only those areas which are comprised in the ground plan approved under Rule 44 of the Central Excise Rules, 1944 would form part of the factory defined under Section 2(e) of the Central Excise Act; that again in their own case, M/s. Hindustan Zinc Ltd. v. CCE, Jaipur, 2002 (147) ELT 989 (Tri), the Tribunal has allowed the Modvat Credit of the duty paid on capital goods used in mining ores following the decision of the Supreme Court in the case of Jaypee Rewa Cement v. CCE, 2001 (133) ELT 3 (SC); that Special Leave to Appeal, filed by the Revenue, has been dismissed by the Supreme Court as reported in 2003 (158) ELT A327. The learned Advocate, further, submitted that the ore, which is mined in the mines, is used in the manufacture of final product and as such any capital goods used in the mines is to be regarded to have been used in the manufacture of final product. Reliance has been placed on the decision in the case of CCE, Jaipur v. Hindustan Zinc Ltd., 2001 (127) ELT 438 wherein the benefit of Notification No. 191/87-CE has been extended to the explosives used for blasting ores in the mines. The Tribunal has held that the activity of mining is integrally connected with the activity of manufacture of final product from the ore generated as a result of mining and the two processes are inter-dependent. Therefore, the explosives, used for blasting mines in order to remove the ore which is raw-material for the manufacture of zinc oxide, are to be considered as `in the manufacture of concentrates'.

He also relied upon the decision in the case of Union of India v. Hindustan Zinc Ltd., 2002 (142) ELT 289 (Raj.) wherein Rajasthan High Court has extended the benefit of Notification No. 191/97-CE to the explosives used for blasting of mines for obtaining ores holding that no referable question of law arises from the Tribunal's decision reported in 2001 (127) ELT 438 (Tri). The learned Advocate has also submitted that the mining is done in the mines located in the approved premises and the ore is brought to the surface by means of conveyor, which is then crushed and concentrated; that the definition of `factory' covers not only premises wherein or in any part of which excisable goods are being manufactured, but it also includes even those premises wherein or in any part of which any manufacturing process concerned with the production of these goods, is being carried out; that it has been held by the Tribunal in the case of Dhampur Sugar Mills Ltd., 2001 (129) ELT 73 that if all the plants, manufacturing different goods are situated in the same premises, are to be regarded as one factory. Similar views have been expressed by the Tribunal in the case of Rollatainers Ltd. v. CCE, 2002 (150) ELT 383.

3. Countering the arguments, Shri V. Valte, learned SDR, submitted that, at the material time, Rule 57Q of the Central Excise Rules provided capital goods credit of the duty paid on the specified goods used in the factory of the manufacturer of final products; that, thus, for availing the Modvat Credit of the duty paid on capital goods, it is pre-requisite that the capital goods are used in the factory of the manufacturer of final products. In the present matter, admittedly, the capital goods are used in the mines and not in the factory of the manufacturer; that the Supreme Court in Jaypee Rawa Cement v. CCE, 2001 (77) ECC 57 (SC) : 2001 (133) ELT 3 (SC) has disallowed the Modvat Credit of the duty paid on the capital goods not used in the factory of the manufacturer of the final product in view of the provisions of Rule 57Q of the Rules; that the mines, in question, are outside the approved ground plan; that the process of mining carried out in mines could not be taken to be covered by the manufacturer of zinc or lead concentrates; that Section 2(m) of the Factory's Act defines the word `factory'; that according to this Section, factory means any premises including the precincts thereof, but it does not include a mine subject to operation of the Mines Act, 1952; that, thus, mines is excluded from the definition in the Factory Act; that following the decision of the Supreme Court in Jaypee Rewa Cement case (supra), the Tribunal in the case of India Cements Ltd. v. CCE, 2002 (147) ELT 393, has held that capital goods used exclusively in mines, are not entitled to Modvat Credit. Reliance has also been placed on the decision in the case of CCE, Hyderabad v. India Cements Ltd., 2000 (118) ELT 700 (Tri) and J.K. Sugar v. CCE, Kanpur, 2000 (125) ELT 542. He also relied upon the Larger Bench decision of the Tribunal in the case of Vikas Industrial Gas v. CCE, Allahabad, 2000 (70) ECC 256 (Tri-LB) : 2000 (118) ELT 257 (Tri-LB) wherein it has been held that the definition of `factory', given in Sec. 2(e) of the Central Excise Act, covers the premises and precincts of the factory and not premises and precincts beyond the factory premises and prencincts. He mentioned that the Tribunal in this case disallowed the capital goods credit in respect of pump used for delivering the water from the reservoir to pipeline of the factory located at a kilometre away from the factory as the same cannot be treated as within the factory precincts. The learned SDR also contended that mines, located below the factory, cannot also be treated as part of the factory.

4. In reply, the learned Advocate, submitted that, as per the ground plan, the concentration plant is within the Rajpura-Dariba Mines inasmuch as the mine of the appellants is located just underneath concentration plan; that, thus, the mines and the factory area are the same and the decision of the Supreme Court in the case of Jaypee Rewa Cement (supra) will not be applicable; that the definition of `factory' under Section 2(e) of the Central Excise Act refers not only to the factory premises but to the precincts thereof also. The mines located underneath the concentration plan will be covered by the definition of the factory as given in the Central Excise Act. He also referred to the decision in the case of Ardeshir H. Bhiwandiwala v. State of Bombay, AIR 1962 SC 29 wherein it has been held that the word `premises' is a generic term meaning open land or land with buildings or buildings alone.

5. We have considered the submissions of both the sides. The Modvat Credit of the duty paid on capital goods under Rule 57Q of the Rules, is available only if the capital goods are used in the factory of the manufacturer of final products. In the present matter, it is not in dispute that the impugned capital goods are used in the mines. It is the contention of the appellants that the mines are located underneath the concentration plant and as such are within the factory premises approved by the Department. It has also been emphasised that, as per the definition, the word `factory' means any premises including the precincts thereof wherein or in any part of which excisable goods or wherein or in any part of it any manufacturing process connected with the production of the excisable goods is being or is ordinarily carried on. The Mines, as per the contention of the appellants, are located underneath the concentration plan. It is, therefore, apparent from this contention itself that the mines are not in the factory as these are located underneath. The mere fact that the mines, which are underground and the factory where the concentration plant is located, both are owned by the appellants, does not make the mines a part of the factory premises. In view of this, we hold that the capital goods, which are used in the mines which are located underneath the factory premises, are not eligible for the Modvat Credit under Rule 57Q of the Central Excise Rules in view of the adjustment of the Supreme Court in the case of Jaypee Rewa Cement (supra). The decisions relied upon by the learned Advocate do not advance the case of the appellants.

In the case of Dhampur Sugar Mills Ltd v. CCE, Meerut, 2001 (129) ELT 73 (Tri), there were three units for manufacture of different excisable goods, namely, sugar, molasses, paper and paper board and chemicals, which is not the case in the present matter as no manufacturing activity takes place in mines. Similarly, in the case of Rollatiners Ltd. (supra), they were having two separate divisions, namely, paper board division and paper division situated in the case premises. The decision in their own case, as reported in 2002 (147) ELT 989 (Tri) is not applicable in view of the judgement of the Supreme Court in the case of Jaypee Rewa Cement (supra), wherein the Supreme Court allowed the input credit under Rule 57A of the rules, which did not in any way restrict the use of the input within the factory premises nor it had required the inputs to be brought into factory premises at any point of time. The Supreme Court, however, did not allow the Modvat Credit of the duty paid on capital goods, in view of the specific provision of Rule 57Q that the capital goods are used in the factory for the manufacture of the final products. We, therefore, reject the appeal, filed by the appellants.

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