HINDUSTAN ZINC LTD. Vs. CCE

JUDGEMENT

(1.) THE appellants are engaged in the manufacture of zinc from zinc concentrate. The zinc concentrate is obtained from zinc ore by a process carried out in their concentration plant. The zinc ore is mined from their own mine. The appellants took Modvat credit amounting to Rs. 9,28,116 during July to September 1998 on certain items claimed to be capital goods under Rule 57Q. Those items were spares or parts/components of material handling and mining equipments used in the mines. The adjudicating authority considered two issues in the case, one of which was whether the Modvat credit taken on the goods not used in the registered premises (concentration plant) but used in the mine was admissible or not. That authority answered the question in the negative by holding that the mining area did not form part of the appellants' factory. That authority held that only that premises which was approved by the proper officer in terms of Rule 44 could be accepted as factory, which, in the appellants' case, was the concentration plant. Since the goods in respect of which the Modvat credit was taken were used in the mining area outside the concentration plant, the Modvat credit was denied. In the appeal preferred by the assessee against the order of the adjudicating authority, the Commissioner (Appeals) affirmed the decision of the lower authority, relying on the Tribunal's Larger Bench decision in Jaypee Rewa Cement v. CCE . Presenting the appellants' case in the present appeal against the decision of the lower appellate authority, ld. Consultant submits that the Larger Bench decision relied on by the lower appellate authority has since been set aside by the Supreme Court in Jaypee Rewa Cement v. CCE and, therefore, the impugned order has lost its support. He further submits that, though it was clearly pleaded by the appellants that the capital goods in question were used in mining activity beneath the concentration plant coming within the approved plan of the factory the lower appellate authority has not considered the plea. The appellants' mines are located at Rajpura Dariba, Rampura Agucha and Zawar. In respect of the mine at Rampura Agucha, ld. Consultant has produced a copy of the order dated 6.11.97 to the Commissioner of Central Excise, Jaipur, wherein the mine was held to be situated in the factory premises approved by the department. As regards the 'modvatability' of the goods under Rule 57Q, the consultant submits that there is no adverse finding in the impugned order. Nevertheless, on this aspect, reliance is placed on the following decisions of the Tribunal:

(2.) LD . JDR Shri V.K. Verma refers to the annexure to the show -cause notice and submits that it was the concentration plant which was accepted as covered by the approved ground plan of the factory and not the mine. He submits that the mine was not comprised in the approved plan and, therefore, no goods used in the mine could be held to have been used in the factory and, consequently, the Modvat credit under Rule 57Q would not be available to such goods. Ld. DR. further submits that the adjudicating authority has recorded a clear finding on this aspect and that such finding has been impliedly affirmed by the lower appellate authority. However, the DR has not contested the Consultant's submission that the Tribunal's Larger Bench decision in Jaypee Rewa Cement stands reversed by the Apex Court.

(3.) IN view of the findings recorded above, I set aside the impugned order and allow the present appeal by way of remand, directing the Commissioner (Appeals) to verify as to whether the mines are within the approved ground plan of the appellants' factory and to record a finding on the question whether the subject goods were used in the "factory" as defined under Section 2(e). If it is found that the goods were used in the factory, Modvat credit will be admissible. The Commissioner (Appeals) shall pass a speaking order in accordance with law, after affording to the assessee a reasonable opportunity of being heard.