Modvat credit on capital goods denied where lubricants were used in mines away from the factory, not in production.

Lubricants could qualify as capital goods for Modvat credit under Rule 57Q only if they were used in the factory of production of the final product. Where the lubricants were used in limestone mines situated away from the cement factory, the statutory requirement of use in the factory was not met. The position was treated as covered by Supreme Court authority on the same factual pattern, which had denied credit in such circumstances. Accordingly, lubricants used in off-factory mines were not eligible for Modvat credit under Rule 57Q.

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Issues: Whether lubricants used in limestone mines away from the cement factory during the relevant period were eligible for Modvat credit as capital goods under Rule 57Q.

Analysis: The lubricants were treated as capital goods for the relevant period, but Rule 57Q also required that such capital goods be used in the factory of production of the final product. The lubricants in question were used in mines situated away from the factory. The same factual pattern had already been dealt with by the Supreme Court, which had denied Modvat credit in such circumstances. The issue was therefore covered against the appellant.

Conclusion: The lubricants used in the off-factory mines were not eligible for Modvat credit under Rule 57Q, and the claim failed.

Ratio Decidendi: Capital goods are eligible for Modvat credit under Rule 57Q only when used in the factory of production; use of such goods in mines away from the factory does not satisfy the rule.

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