2002 (8) TMI 166 - AT - Central Excise

Ropeways extending outside factory treated as capital goods for Modvat credit; external portion counted as integral extension

The dominant issue was whether Modvat credit on ropeways could be availed as 'capital goods' when the ropeways were partly located outside the factory. ... Modvat/Cenvat - availing the benefit of Modvat credit of duty paid on capital goods and inputs - manufacture of clinker and cement in the factory - HELD THAT:- Revenue submits that there is a distinction between the definition of use of capital goods in the factory. He submits that under the capital goods the requirement is that the capital goods must be used within factory and since ropeways are not used within the factory, therefore, Modvat credit cannot be allowed on ropeways as capital goods. We note that similar issue came up before the Tribunal in the case of C.C.E., Chennai v. Pepsico India Holdings Ltd. [2000 (10) TMI 122 - CEGAT, CHENNAI] in which it was held that Modvat credit as capital goods will be admissible on the pipeline outside the factory as the extension of pipeline within the factory. In the instant case also, ropeways are partly inside the factory and partly outside the factory. The extension outside the factory is a part of ropeway inside the factory and therefore, it should be treated as capital goods and Modvat credit has rightly been taken by the appellants. In the circumstances, the appeal is allowed. Consequential relief, if any, shall be admissible to the appellants in accordance with law. Issues involved: Appeal against disallowance of Modvat credit on ropeway used for manufacturing cement and clinker.Details of the Judgment:1. The appellants appealed against the disallowance of Modvat credit on a ropeway used for transferring crushed limestone from captive mines to the factory for manufacturing clinker and cement. The Department contended that since the ropeways were not within the factory, they could not be considered as capital goods for Modvat credit. The Commissioner (Appeals) upheld the decision. 2. The appellants argued that a similar issue was addressed in a previous Tribunal case, C.C.E., Chennai v. Pepsico India Holdings Ltd., where it was held that certain infrastructure outside the factory could be considered as part of the factory for Modvat credit purposes. The appellants requested that their appeal be allowed based on this precedent.3. The Revenue submitted that capital goods must be used within the factory to qualify for Modvat credit, and since the ropeways were not entirely within the factory, they should not be eligible for the credit.4. The Tribunal noted the precedent set in the case of C.C.E., Chennai v. Pepsico India Holdings Ltd., where it was established that certain infrastructure outside the factory could be considered as part of the factory for Modvat credit purposes. In this case, as the ropeways were partly inside and partly outside the factory, the extension outside was deemed as part of the ropeway inside the factory, making it eligible for Modvat credit. The appeal was allowed, and any consequential relief was to be granted to the appellants as per the law.