Modvat credit for capital goods in mining operations allowed under a broad reading of the scheme

Modvat credit was considered available on capital goods used in mining ores, because the Tribunal applied the Supreme Court's broad reading of the Modvat scheme. It noted that Rule 57A had already been interpreted to cover inputs used in relation to manufacture, whether directly or indirectly, and not only within factory premises. The Tribunal extended that reasoning to the capital goods provisions and treated the same principle as applicable in the present matters. Credit was therefore allowed in favour of the assessee on the basis of that wider construction of the scheme.

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Issues: Whether Modvat credit was available on capital goods used in mining ores.

Analysis: The appeals were found to be governed by the Supreme Court's interpretation of the Modvat scheme. The Tribunal noted that the earlier decision construed Rule 57A broadly and held that inputs used in relation to manufacture, directly or indirectly, need not be confined to the factory premises. Although that decision considered Rules 57A and 57J in the context of inputs, the Tribunal held that the same reasoning equally applied to capital goods provisions in the present matters.

Conclusion: Modvat credit was held to be available on capital goods used in mining ores, and the issue was decided in favour of the assessee.

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