Integrated captive mines determine Modvat credit entitlement on capital goods, requiring factual finding before disallowance.

Modvat credit on capital goods used in captive mines depends on whether the mines form one integrated unit with the cement factory. Where the mines are captive and function as part of the assessee's own integrated manufacturing setup, credit is available; where they are not captive or supply other assessees, credit is unavailable. The decisive issue was factual use of the capital goods, but the Tribunal had not recorded a finding on that core question before disallowing credit. The matter was therefore remanded to the Original Authority for fresh consideration under the controlling Supreme Court decisions.

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Issues: Whether Modvat credit on capital goods used in captive mines could be denied without a finding on whether the mines formed an integrated unit with the cement factory and whether the Tribunal's disallowance could stand in the absence of such factual determination.

Analysis: The applicable principle, as reflected in the Supreme Court decisions relied on, is that credit on capital goods is available where captive mines constitute one integrated unit with the cement factory, while credit is unavailable where the mines are not captive or supply other assessees. The decisive question was therefore factual, namely whether the capital goods were used in the assessee's own factory, in an integrated captive mine, or in other mines. The Tribunal had not returned any finding on this core aspect before disallowing the credit.

Conclusion: The Tribunal's orders could not be sustained and the matter was remanded to the Original Authority for reconsideration of the credit entitlement on the basis of the controlling Supreme Court decisions.

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