Modvat credit denied for mining machinery: statutory exclusion from inputs and use outside the factory defeated the claim.

Machinery, equipment, parts and accessories used in limestone mines were not eligible for Modvat credit under Rule 57A because the Explanation to that rule excluded machines, plant, equipment, tools and appliances used for producing or processing goods, even if they were connected with cement manufacture. The claim under Rule 57Q also failed because capital goods credit required use in the factory of manufacture, whereas the goods were used in mines outside the factory. Delay and notice objections were immaterial once credit itself was inadmissible.

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Issues: Whether Modvat credit was admissible on machinery, equipment, parts and accessories used in limestone mines as inputs under Rule 57A of the Central Excise Rules, 1944, and as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The impugned goods were machinery, equipment and parts and accessories used in mining limestone. For credit under Rule 57A, it was not enough that the goods were used in or in relation to manufacture; they also had to fall within the definition of inputs. The Explanation to Rule 57A specifically excluded machines, machinery, plant, equipment, apparatus, tools and appliances used for producing or processing goods or for bringing about a change in substance. Since the goods in question were of that nature, they were outside the ambit of inputs notwithstanding their connection with the cement manufacturing process. The claim under Rule 57Q also failed because, although such goods may answer the description of capital goods, the provision required use in the factory of manufacture, whereas the goods were used in mines outside the factory. The objection regarding delay beyond six months and the alleged vagueness of the notice did not survive once credit itself was held inadmissible.

Conclusion: The credit was not admissible under Rule 57A or Rule 57Q, and the assessee's challenge failed.

Ratio Decidendi: Goods expressly excluded from the statutory definition of inputs cannot qualify for Modvat credit merely because they are used in or in relation to manufacture, and capital goods credit is unavailable where the goods are used outside the factory.

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