2010 (7) TMI 179 - SCH - Central Excise

SC allows MODVAT/CENVAT credit on explosives, restricts capital goods credit to captive mines integrated with cement factories

SC held that MODVAT/CENVAT credit on inputs such as explosives and lubricating oils is allowable, following its earlier decision in Vikram Cement. For ... MODVAT/CENVAT credit on inputs - MODVAT/CENVAT credit on capital goods - captive mines as an integrated unit with factory - non-captive mines supplying other assessees - remand for factual determinationMODVAT/CENVAT credit on inputs - precedent of Vikram Cement - Entitlement to MODVAT/CENVAT credit on inputs used in mines - HELD THAT: - The Court held that entitlement to MODVAT/CENVAT credit on inputs (for example explosives, lubricating oils) used in mines is covered by the earlier decision in Vikram Cement Vs. CCE (reported in 2006 (194) ELT 3). On that basis the appeals insofar as they relate to credit on inputs are allowed. The Court accepted the precedent as determinative and applied it to the present appeals. [Paras 2]Credit on inputs allowed in accordance with Vikram Cement; appeals allowed on this point.MODVAT/CENVAT credit on capital goods - captive mines as an integrated unit with factory - non-captive mines supplying other assessees - remand for factual determination - Availability of MODVAT/CENVAT credit on capital goods used in mines - HELD THAT: - The Court laid down the legal test: where mines are captive so as to constitute one integrated unit with the cement factory, MODVAT/CENVAT credit on capital goods used in such mines is available to the assessee. Conversely, where mines are non-captive and supply various other cement manufacturers, and the capital goods are used in limestone mines outside the factory of the assessee, such credit will not be available under the applicable MODVAT/CENVAT Rules. The Court did not decide the factual question for each appeal but remanded the matters to the original authorities for decision solely on this issue of whether the mines are captive/integrated or non-captive. [Paras 3]Legal test stated; issues remanded to original authorities for factual determination whether mines are captive (credit available) or non-captive (credit not available).Final Conclusion: Appeals allowed insofar as MODVAT/CENVAT credit on inputs is concerned (following Vikram Cement). For MODVAT/CENVAT credit on capital goods the Court articulated the captive-versus-non-captive test and remanded the matters to the original authorities for determination on that limited issue; appeals disposed of with no order as to costs. The Supreme Court ruled on the eligibility of MODVAT/CENVAT credit on inputs and capital goods used in mines. Credit on inputs like explosives and lubricating oils is allowed based on a previous decision. For capital goods, credit is available if mines are captive to the cement factory, but not if they supply to other companies. Cases are remanded for further decision. No costs awarded.