Modvat credit for mine equipment denied where limestone extraction was treated as separate from factory manufacture.

Hydraulic excavators used in limestone mining outside the factory premises were not treated as capital goods eligible for Modvat credit under Rule 57Q. Mining was regarded as a separate operation from manufacture, and cement manufacture was said to begin only when limestone entered the factory for crushing and further processing. Equipment used to produce raw material outside the factory, even if connected with ultimate manufacture, was therefore outside the manufacturing process for Modvat purposes. On that basis, the excavator used in the mine was held not to fall within Rule 57Q, and the credit claim was rejected.

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Issues: Whether hydraulic excavator used in limestone mining outside the factory premises qualified for Modvat credit as capital goods under Rule 57Q.

Analysis: The Tribunal followed its earlier decision on the same statutory scheme and held that mining activity is a separate operation from manufacture in the factory. The manufacture of cement was held to commence only when limestone entered the factory for crushing and further processing. Operations carried out to generate raw material outside the factory, even if connected with the ultimate manufacture of cement, were not treated as part of the manufacturing process for purposes of Modvat credit. On that basis, the excavator used in the mine was not regarded as covered by Rule 57Q.

Conclusion: The claim for Modvat credit on the hydraulic excavator was rejected and the appeal failed.

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