2006 (5) TMI 516 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat Credit on cement and steel used for erecting the Effluent Treatment Plant.
2. Eligibility of Modvat Credit on items used for installation of Effluent Treatment Plant.
3. Admissibility of Modvat Credit on articles used in erecting capital goods and plants.
4. Denial of Modvat Credit on immovable property.

Analysis:

Issue 1: Disallowance of Modvat Credit on cement and steel used for erecting the Effluent Treatment Plant
The Deputy Commissioner disallowed the Modvat Credit availed by the Appellant on cement and steel used for erecting the Effluent Treatment Plant. The Commissioner (Appeals) upheld this decision, stating that though ETP is eligible as capital goods, cement and steel used for construction are not eligible under Rule 57Q.

Issue 2: Eligibility of Modvat Credit on items used for installation of Effluent Treatment Plant
The Tribunal found that the ETP was set up as per the Supreme Court's directions, and cement and steel were essential for its installation. Previous decisions highlighted that pollution control equipment is integral to the manufacturing process, making items used in ETP eligible for Modvat Credit.

Issue 3: Admissibility of Modvat Credit on articles used in erecting capital goods and plants
The Tribunal referenced various decisions supporting the admissibility of Modvat Credit on items like cement and steel used in erecting capital goods and plants. It was emphasized that even if the plant is considered immovable property, Modvat Credit cannot be denied.

Issue 4: Denial of Modvat Credit on immovable property
The Tribunal clarified that Modvat Credit on capital goods and goods used in manufacturing immovable property cannot be denied. Previous rulings established that such credit is permissible under Rule 57A of the Central Excise Rules, 1944.

In conclusion, the Tribunal held that the Commissioner (Appeals) erred in disallowing Modvat Credits on materials essential for the ETP installation. The Appellant followed all procedural formalities for availing the credit, and the appeal was allowed with consequential reliefs.