Cenvat credit on lubricating oil in captive mines upheld where captive lease and in-house consumption were proved.

Credit on lubricating oil used in captive mining operations was upheld because the assessee established a captive mining lease through the lease deeds and Government Orders, and the mined limestone was shown to be captively consumed in cement manufacture. The Revenue produced no contrary evidence of clearance to outsiders, so the credit claim remained admissible under the applicable credit principle. The Tribunal therefore sustained the assessee's entitlement to credit on inputs used in the mines where captive use and captive consumption were proved.

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Issues: (i) Whether the respondent had a captive mining lease during the relevant period. (ii) Whether the mining products were cleared to outsiders so as to affect eligibility for credit on lubricating oil used in the mines.

Issue (i): Whether the respondent had a captive mining lease during the relevant period.

Analysis: The relevant Government Orders and lease deeds showed that the State had granted mining leases in favour of the respondent for long terms, subject to the stipulated conditions, royalty and rents. The lease documents also set out the rights, liabilities and restrictions governing use of the mines. On this material, the factual position of captive mining lease stood established for the relevant period.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): Whether the mining products were cleared to outsiders so as to affect eligibility for credit on lubricating oil used in the mines.

Analysis: The record showed an undertaking that the limestone mined was captively consumed in the manufacture of cement and was not sold to outsiders. No contrary evidence was produced by the Revenue. In the absence of proof of clearance to outsiders, the credit claim on lubricating oil used in the captive mines was sustainable in light of the governing credit principle applied by the Tribunal.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The Revenue's challenge failed and the credit benefit was upheld on the basis that the mines were captive and the mined products were shown to be captively consumed, not cleared to outsiders.

Ratio Decidendi: Credit on inputs or capital goods used in captive mining operations is admissible where the assessee establishes a captive lease and captive consumption, and the Revenue fails to prove clearance to outsiders.

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