Modvat credit on mining equipment denied where excavators and dumpers were used outside the factory precincts.

Excavators and dumpers used in mines outside the factory precincts do not qualify as capital goods for Modvat credit where the statutory scheme restricts credit to goods used within the factory for manufacture or processing. The text notes that mines are excluded from the definition of factory under the Central Excise Act and the Factories Act, 1948, and applies earlier reasoning that dumpers used in mines cannot attract Rule 57Q credit. On that basis, credit on the equipment was held inadmissible and the order allowing it was set aside.

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Issues: Whether excavators and dumpers used in mines, outside the precincts of the factory, qualify as capital goods for Modvat credit under Rule 57Q.

Analysis: Modvat credit on capital goods is available only where the goods are used in the factory for producing or processing final goods. The excavators and dumpers in question were used in mines for lifting and transporting limestone, not within the factory. Mines are excluded from the statutory definition of factory under the Central Excise Act, and the supporting definition under the Factories Act, 1948 also excludes mines. The earlier decision on similar facts held that dumpers used within mines cannot be treated as capital goods for Modvat purposes, and that reasoning directly applied here.

Conclusion: The excavators and dumpers were not eligible for Modvat credit as capital goods, and the issue is decided against the assessee and in favour of the Revenue.

Final Conclusion: Credit was not admissible on the equipment used in the mines, and the order granting such credit was set aside.

Ratio Decidendi: Equipment used in mines outside the factory precincts does not qualify as capital goods for Modvat credit when the statutory scheme confines eligibility to use within the factory for manufacture or processing.

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