2003 (3) TMI 239 - AT - Central Excise

Denial of Modvat credit for diesel locomotive engine used outside factory premises

NEER SHREE CEMENT Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR

The Tribunal ruled against the appellant, denying the Modvat credit for the diesel locomotive engine. The decision was based on the finding that the ... Cenvat/Modvat - Modvat on capital goods Issues involved:Whether Capital Goods Credit is available under Rule 57A of the Central Excise Rules, 1944 in respect of the Diesel Locomotive Engine.Analysis:The appeal filed by M/s. Neer Shree Cement questioned the availability of Capital Goods Credit under Rule 57A for the Diesel Locomotive Engine. The Assistant Commissioner disallowed the Modvat credit based on two grounds: first, the engine's use did not qualify as handling raw material integral to the manufacturing process, and second, the engine was not used within the appellant's factory. The Commissioner (Appeals) upheld the first objection but sustained the second, noting the engine's location within a separate entity's factory premises. The appellant argued that both entities should be considered a singular factory under Section 2(e) of the Central Excise Act, citing relevant case law. However, the opposing argument highlighted a Supreme Court judgment emphasizing that capital goods credit is only available for machinery used within the factory premises.The Tribunal examined the relevant provisions and definitions under the Central Excise Act. It was established that for Modvat credit eligibility, capital goods must be used within the manufacturer's factory. The appellant claimed the railway track, including the engine, was within their factory premises owned by another entity. However, the Tribunal found this argument inconsistent with the appellant's initial submission, concluding that the track was situated within the separate entity's factory premises. The Tribunal emphasized that the benefit of Modvat credit is contingent on the capital goods being used in the appellant's factory, not in another entity's premises. Referring to precedent cases, the Tribunal clarified that a separate license is issued for each factory, and premises of another factory cannot be considered part of the appellant's factory. Consequently, the Tribunal ruled against the appellant, denying the Modvat credit for the diesel locomotive engine and rejecting the appeal.