Modvat credit for pollution control equipment recognised where the item formed part of the manufacturing process and waste treatment

Modvat credit under Rule 57Q was examined for an electrostatic hydraulic oil cleaner used as pollution control equipment and as a spare for an electrostatic precipitator. The decisive point was whether pollution control use excluded the equipment from capital goods credit; that denial was found unsustainable because treatment of effluents and removal of waste materials were treated as integral to manufacture. On that reasoning, the same principle was applied to the subject equipment, and credit was admissible.

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Issues: Whether Modvat credit under Rule 57Q was admissible on an electrostatic hydraulic oil cleaner used as pollution control equipment and as a spare to an electrostatic precipitator.

Analysis: The equipment was used for pollution control, but the decisive question was whether such use could still be treated as part of the manufacturing process for the purpose of capital goods credit. The reasoning denying credit solely because the equipment served pollution control was held unsustainable. The treatment of effluents and removal of waste materials were treated as integral to manufacture, and the same principle was applied to the subject equipment used in relation to pollution control.

Conclusion: Modvat credit was admissible on the subject equipment, and the denial of credit was not sustainable.

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