Modvat/Cenvat credit at captive mine sites upheld where mines form an integrated part of the factory.

Modvat/Cenvat credit is admissible on inputs and duty-paid capital goods used at captive mine sites where the mines form an integrated part of the factory. The later Supreme Court view displaced the earlier restrictive approach, so credit cannot be denied merely because the mines are located away from the factory premises. On that basis, the principle was extended to capital goods as well as inputs used in the captive mining setup, and the denial of credit on the facts of integrated captive operations was unsustainable.

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Issues: Whether Modvat/Cenvat credit on capital goods and inputs used at captive mine sites is admissible when the mines constitute an integrated part of the factory.

Analysis: The question was governed by the later Supreme Court view that the earlier restrictive approach could not stand where captive mines formed an integrated unit with the factory. Credit was held admissible for inputs used at captive mines, and the principle was extended to capital goods used at such captive mine sites when they formed part of the integrated manufacturing setup. The denial of credit merely because the mines were away from the factory site was therefore unsustainable on the facts of captive mining.

Conclusion: Modvat/Cenvat credit on duty paid capital goods and inputs used at captive mine sites is admissible if the mines are otherwise eligible and form an integrated part of the factory; the assessee succeeds.

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