"6.... It is recognized by judicial decisions that captive mines have to be considered as part of the factory only.
7. The definition of "capital goods" at Rule 2 (a) of CENVAT Credit Rules, 2004 reads as under:
"x x x"
8. The above definition does not cover LDPT which falls under chapter 87 of the Central Excise Tariff used by the appellant who is a manufacturer of excisable goods. So it is fairly clear that LDPT cannot be treated as "capital goods".
9. The next issue is whether LDPT can be considered as an "input" within the definition at Rule 2 (k). This definition covers goods "used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not". There is nothing specifically stated in the rule to exclude equipment or plant or machinery. But by implication what is included in Rule 2(a) is excluded from Rule 2 (k). Since chapter 87 is not included in rule 2 (a) it cannot be excluded from 2 (k) by applying this logic. This is the main reason for the present dispute.
10. It is interesting to note that historically capital assets were not considered as "inputs". In rule 57A of Central Excise Rules 1944 as introduced by Notification 176/86-CE dt.1.3.86 allowed Modvat credit on "inputs", there was an explanation which read as under:
"Explanation. - For the purposes of this rule, 'inputs' includes paints and packaging materials but does not include : -
(i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products ;
(ii) packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is being availed of for packaging any final products ;
(iii) packaging materials the cost of which is not included or had not been included during the preceding financial year in the assessable value of the final products under section 4 of the Act ; or
(iv) cylinders for packing gases."
11. However such express legal provision got omitted when CENVAT credit was allowed for capital goods since 01-03-1994 and is absent in the present CENVAT Credit Rules, 2004. The present argument of Revenue relies mainly on common understanding of the expressions "inputs" and "capital goods" and historical evolution of the definitions for these expressions for allowing CENVAT credit. The Tribunal in the case of Aditya Cement Vs. CCE Jaipur-II-2009 (245) E.L.T. 266 (Tri.-Del) has held that goods which are accounted as capital assets cannot be considered as inputs. There is no reason to differ from this view.
12. So I accept the argument of Revenue that LDPT is neither covered by definition of "capital goods" or "inputs" in CENVAT Credit Rules, 2004. But that is not the issue in dispute before me.
13. The issue before me is whether tyres which are used as part of LDPT can be considered as inputs. Revenue argues that when LDPT cannot be considered as either capital goods or input then its parts also cannot be considered as either capital goods or input and hence credit should be denied. As already explained nothing in the definition of "capital goods" or "inputs" provides for explicitly excluding tyres from either of the definitions. However there can be hardly any doubt that tyres are not covered by definition for "capital goods". However that is not the case with the definition of "inputs". If it is to be excluded it has to be only by implication. Revenue has not advanced any argument that tyres are being accounted as capital assets and hence it cannot be considered as inputs. The only argument is that tyres are used as a part of a capital asset (not part of "capital goods" as defined in Rule 2 (a)).
14. Tyres get used in the process of handling raw materials which is an integral part of manufacturing process as held by the Apex Court in CCE Vs. Rajasthan State Chemicals (2002-TIOL-66-SC-CX). CENVAT credit is allowed on goods which get consumed over a period of time like refractory lining or catalyst. The objection that tyres do not form part of final product also not a valid objection because so is the case with refractory lining and catalysts and similar items.
15. If one goes by the general principles as laid down by the Apex Court in para 17 and 22 of the decision of the Apex Court in CCE Vs. Rajasthan State Chemicals (2002-TIOL-66-SC-CX) the goods can be considered as inputs. Similar is the view taken by Kolkota High Court in Singh Alloys and Steel Vs. CCE 1993 (66) ELT 594 (Kol). So I do not see any reason to deny the credit on tyres for LDPT. In view of analysis as above the impugned orders are set aside and appeals are allowed holding that CENVAT Credit is available on tyres of LPDT used by the appellant in mines."
