J.K. CEMENT WORKS Vs. CCE, JAIPUR

JUDGEMENT

(1.) THE appellants are manufacturers of cement. Limestone, is their principal raw material, which is obtained by mining activity done in their mines. Large limestone boulders from the mine are mechanically transferred to, and crushed in, their crusher to obtain chips (smaller pieces) of limestone. These operations involve material handling machinery, apart from the crusher. The crusher and other machinery require lubrication which is impaled through lubricating oils and greases. During July -September, 1999, the appellants took Modvat credit of Rs. 20,734/ - on such lubricants, treating the goods as capital goods under Rule 57Q. A dispute arose in this regard between the appellants and the department, which was adjudicated by the jurisdictional Asstt. Commissioner, who disallowed the Modvat credit after holding that the lubricants which were used in the mine and not in the factory as required under Rule 57Q were not eligible for the credit under the said Rule. The party went in appeal before the Commissioner (Appeals). The lower appellate authority rejected the appeal, following its own earlier Order -in -Appeal No. 882 -908/2000 dated 25.8.2000. Hence the present appeal of the assessee. Heard both sides.

(2.) CONSIDERED the submissions. There is no dispute of the fact that the limestone mine and the site of the crusher were not included in the approved plan of the factory. Rule 57Q, as it stood during the relevant period, stipulated that the capital goods to be eligible for Modvat credit under the Rule should have been used in the factory of manufacture of the final product. Ld. Counsel's argument that what is material for deciding the Modvat Ability of any capital goods under Rule 57Q is whether the goods were used 'in relation to' the manufacture of final product irrespective of where the goods were situated cannot be accepted. The further argument of the Counsel that the factory includes all those areas where capital goods which are used in or in relation to the process of manufacture of final product are situated is also liable to be rejected. In my view, no area lying outside the ground plan of the factory as approved/certified under Rule 44 could form part of factory under Section 2(e) of the Act. The crusher and other machinery were admittedly located and used outside the area covered by the approved ground plan of the factory. A Two -Member Bench of this Tribunal held those machineries to be ineligible capital goods under Rule 57Q in the appellants' own case. The lubricants were used for lubricating those machineries only. Therefore, like the machinery itself, the lubricants will be held to be ineligible capital goods. I am following the ratio of the decision of the Two Member Bench, in view of the fact that there is no stay of operation of that decision. To my mind, the case law cited by Id. Advocate is in a different context. Even if it be assumed that the case law has any bearing on the facts of this case, it has to be noted that both the decisions (in Duraiappa and Sunderson) are per Incuriam in the light of the Supreme Court's decision in Hyderabad Industries case [ : 1999 (82) ECR 449 (SC)], wherein it was held that the activity of separation of asbestos fibre from asbestos rock albeit by a complex operation did not amount to 'manufacture' within the meaning of Section 2(f) of the Central Excise Act. Following the decision of the Two Member Bench of this Tribunal in the appeal filed by these appellants against Order -in -Appeal No. 882 -908/2000 passed by the lower appellate authority, I hold that the lubricants used in the crusher and other material -handling equipments located and used outside the cement factory were not capital goods eligible for Modvat credit during the material period. The impugned order has to be sustained. The appeal is rejected.