Modvat credit for mining equipment parts used outside the factory was denied because the goods were not used in the factory.

Modvat credit under Rule 57Q was confined to capital goods used in the factory, and spare parts of mining equipment used in mines situated away from the cement factory did not qualify. The mines were not treated as part of the factory for credit purposes, and the Tribunal followed Supreme Court authority on similar facts to deny relief. Credit was therefore held inadmissible on goods used outside the factory premises, and the claim failed against the assessee.

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Issues: Whether Modvat credit was admissible on spare parts of mining equipment used in mines situated away from the factory and not approved as part of the factory.

Analysis: The goods on which credit was claimed were used in mines located away from the cement factory. The governing scheme allowed credit on capital goods used in the factory, and the mines were not treated as part of the factory. The appeal was covered against the appellant by the Supreme Court decision relied upon by the Tribunal, which held that no relief was available on similar facts under Rule 57Q.

Conclusion: Modvat credit was not admissible, and the issue was decided against the assessee.

Ratio Decidendi: Modvat credit under Rule 57Q is available only for capital goods used in the factory, and not for goods used in mines outside the factory.

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