MODVAT credit on lubricants used in captive mines was upheld as admissible for manufacturing-related machinery.

Lubricating oils used in captive mines were treated as capital goods for MODVAT credit under Rule 57Q of the Central Excise Rules, 1944, where they supported machinery connected with manufacturing activity. The analysis relies on the view that capital goods used in the manufacturing process can qualify for credit even when employed outside the factory premises, and that the assessee's earlier case had already accepted that principle. On that basis, the credit on lubricants used in captive mines was held admissible and the Revenue's challenge failed.

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Issues: Whether MODVAT credit on lubricants used in captive mines was admissible under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The lubricating oils were covered as capital goods under the rule as it stood during the relevant period. The assessee's own earlier case had already held that capital goods used in the manufacturing process, even outside the factory premises, were eligible for credit. Since the lubricants were used in captive mines for machinery connected with the manufacturing activity, the credit was held to be admissible.

Conclusion: MODVAT credit was rightly allowed to the assessee, and the Revenue's appeal failed.

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