Modvat credit for capital goods requires use within the assessee's own factory, not a separately registered unit's premises.

Modvat credit on a diesel locomotive engine was confined to capital goods used within the assessee's own factory under Rule 57Q of the Central Excise Rules, 1944. The term "factory" covered the premises and precincts where manufacturing was carried on, but not the premises of another separately registered factory merely because both units had common ownership. As the railway track and engine were located in the other factory's premises, and use within the assessee's factory was not established, the credit was held inadmissible.

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Issues: Whether Modvat credit on a diesel locomotive engine, claimed as capital goods, was admissible when the engine was used on railway lines situated in the premises of another separately registered factory.

Analysis: Credit under Rule 57Q of the Central Excise Rules, 1944 was available only for capital goods used in the factory of the manufacturer. The expression "factory" in Section 2(e) of the Central Excise Act includes the premises and precincts where manufacturing is carried on, but premises belonging to another factory cannot be treated as the assessee's factory merely because the same owner controls both units. On the facts, the railway track and the engine were located in the premises of the other factory, and the assessee failed to establish use within its own factory premises.

Conclusion: The Modvat credit was not admissible to the assessee.

Final Conclusion: The appeal failed because the impugned capital goods were not shown to have been used in the assessee's factory.

Ratio Decidendi: Capital goods credit is available only when the goods are used within the assessee's factory, and common ownership does not make the premises of a separate factory part of that factory.

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