2005 (10) TMI 319 - AT - Central Excise

Summary

Issues involved:
Modvat credit allowance for PVC pipes carrying treated water for agricultural purposes within the factory compound as per directions of Gujarat High Court/Pollution Control Board.

Analysis:
The case revolved around the allowance of Modvat credit for PVC pipes used to carry treated water for agricultural purposes within the factory compound, as directed by the Gujarat High Court and Pollution Control Board. The key issue was whether Modvat credit could be granted for such usage, considering the specific circumstances and legal provisions.

The Advocate referenced Rule 57Q, highlighting the evolution of the rule from 1994 to 1997. The modified Rule 57Q in 1997 broadened the scope by stating, "The goods... used in the factory of the manufacturer of final products." This change was argued to be more flexible and expansive compared to the 1994 version.

Citing legal precedents, the Advocate mentioned the Supreme Court case of Jawahar Mills and the Tribunal's judgment in the case of Shriram Alkali & Chemicals. These cases emphasized that goods eligible for Modvat credit need not be directly used in the manufacture of the final product but should be utilized within the factory premises.

Further, the Tribunal's decisions in cases involving Toyota Kirloskar Motor Ltd. and Hindustan Coca Cola Beverages Pvt. Ltd. were discussed. These cases highlighted the broadening scope of Modvat credit eligibility, especially after amendments to Rule 57Q, allowing for credit even when capital goods are used outside the factory but within the factory premises.

The definition of "factory" under Section 2(e) of the Central Excise Act was crucial in determining the eligibility of Modvat credit. The Act defines a factory as premises where manufacturing processes are carried out, emphasizing the connection to the production of goods. The Tribunal's observations in the case of CCE, Chennai v. Pepsico India Holding Ltd. further supported the interpretation of pipelines within the factory premises as part of the manufacturing process.

Considering the appellant's compliance with obligations from the Pollution Control authorities and the specific usage of PVC pipes within the factory for agricultural purposes, the Tribunal ruled in favor of granting Modvat credit for the pipes. The decision highlighted the interlinking of manufacturing processes with legal obligations and approved factory plans, ultimately allowing the appeal partially and overturning the lower authority's decision to disallow Modvat credit for the PVC pipes used within the factory for agriculture purposes.