Modvat credit for inputs used in an effluent gas treatment plant was upheld as part of manufacturing activity.

Sulphuric acid used in a tail gas treatment plant was held eligible for Modvat credit because the plant was treated as part of the manufacturing process. The plant handled effluent gases arising during manufacture of zinc, cadmium and lead, so inputs consumed in that integrated treatment facility were considered used in manufacture of the final products. Applying the principle that an effluent treatment facility integrally connected with production supports credit eligibility, the Revenue's appeals were rejected and credit was upheld.

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Issues: Admissibility of Modvat credit on sulphuric acid used in the tail gas treatment plant for treatment of effluent gases.

Analysis: The tail gas treatment plant was treated as part of the manufacturing process because the plant was used for treatment of effluent gases arising in the course of manufacture of zinc, cadmium and lead. On that basis, the sulphuric acid used in the plant was considered eligible for Modvat credit. The earlier principle that an effluent treatment plant used in manufacture supports the availability of credit was applied to the facts of the present case.

Conclusion: The Modvat credit was correctly allowed and the Revenue's appeals were liable to be rejected.

Final Conclusion: Credit eligibility was upheld on the footing that the plant used for effluent gas treatment formed part of the manufacturing activity.

Ratio Decidendi: Inputs used in an effluent treatment facility that is integrally connected with manufacture are eligible for Modvat credit where the facility is treated as used in the manufacture of the final products.

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