HINDUSTAN ZINC LIMITED Vs. CCE

JUDGEMENT

(1.) THE issue involved in this appeal, filed by M/s. Hindustan Zinc Ltd., is whether Modvat Credit of the duty paid on capital goods used in the mines, is available to them.

(2.) SHRI V. Lakshmikumaran, learned Advocate, submitted that the appellants are engaged in the manufacture of lead and zinc ores, which are being transferred mainly to their smelters for being subjected to smelting process for manufacture of non -ferrous metals and their by -products; that the mining is being done within the factory premises approved by the Department and, therefore, the capital goods, in question, are being used within the factory premises and not outside the factory; that it has been held in their own case as reported in 2002 (147) ELT 1185 (Tri) that only those areas which are comprised in the ground plan approved under Rule 44 of the Central Excise Rules, 1944 would form part of the factory defined under Section 2(e) of the Central Excise Act; that again in their own case, Hindustan Zinc Ltd. v. CCE, Jaipur, 2002 (147) ELT 989 (Tri), the Tribunal has allowed the Modvat Credit of the duty paid on capital goods used in mining ores following the decision of the Supreme Court in the case of Jaypee Rewa Cement v. CCE, 2001 (133) ELT 3 (SC); that Special Leave to Appeal, filed by the Revenue, has been dismissed by the Supreme Court as reported in 2003 (158) ELT A327. The learned Advocate, further, submitted that the ore, which is mined in the mines, is used in the manufacture of final product and as such any capital goods used in the mines is to be regarded to have been used in the manufacture of final product. Reliance has been placed on the decision in the case of CCE, Jaipur v. Hindustan Zinc Ltd., 2001 (127) ELT 438 wherein the benefit of Notification No. 191 /87 -CE has been extended to the explosives used for blasting ores in the mines. The Tribunal has held that the activity of mining is integrally connected with the activity of manufacture of final product from the ore generated as a result of mining and the two processes are inter -dependent. Therefore, the explosives, used for blasting mines in order to remove the ore which is raw -material for the manufacture of zinc oxide, are to be considered as 'in the manufacture of concentrates'.

(3.) COUNTERING the arguments, Shri V. Valte, learned SDR, submitted that, at the material time, Rule 57Q of the Central Excise Rules provided capital goods credit of the duty paid on the specified goods used in the factory of the manufacturer of final products; that, thus, for availing the Modvat Credit of the duty paid on capital goods, it is pre -requisite that the capital goods are used in the factory of the manufacturer of final products. In the present matter, admittedly, the capital goods are used in the mines and not in the factory of the manufacturer; that the Supreme Court in Jaypee Rewa Cement v. CCE, 2002 (77) ECC 57 (SC) : 2001 (133) ELT 3 (SC) has disallowed the Modvat Credit of the duty paid on the capital goods not used in the factory of the manufacturer of the final product in view of the provisions of Rule 57Q of the Rules; that the mines, in question, are outside the approved ground plan; that the process of mining carried out in mines could not be taken to be covered by the manufacturer of zinc or lead concentrates; that Section 2(m) of the Factory's Act defines the word 'factory'; that according to this Section, factory means any premises including the precincts thereof, but it does not include a mine subject to operation of the Mines Act, 1952; that, thus, mines is excluded from the definition in the Factory Act; that following the decision of the Supreme Court in Jaypee Rewa Cement case (supra), the Tribunal in the case of India Cements Ltd. v. CCE, 2002 (147) ELT 393, has held that capital goods used exclusively in mines, are not entitled to Modvat Credit. Reliance has also been placed on the decision in the case of CCE, Hyderabad v. India Cements Ltd., 2000 (118) ELT 700 (Tri) and J.K. Sugar v. CCE, Kanpur, 2000 (125) ELT 542. He also relied upon the Larger Bench decision of the Tribunal in the case of Vikas Industrial Gas v. CCE, Allahabad, 2000 (70) ECC 256 (Tri -LB) : 2000 (118) ELT 257 (Tri -LB) wherein it has been held that the definition of 'factory', given in Section 2(e) of the Central Excise Act, covers the premises and precincts of the factory and not premises and precincts beyond the factory premises and prencincts. He mentioned that the Tribunal in this case disallowed the capital goods credit in respect of pump used for delivering the water from the reservoir to pipeline of the factory located at a kilometre away from the factory as the same cannot be treated as within the factory precincts. The learned SDR also contended that mines, located below the factory, cannot also be treated as part of the factory.