Modvat credit for specialised storage tanks used as plant accessories under Rule 57Q was upheld for industrial gas storage.

Storage tanks specially designed for industrial gas storage were treated as eligible for Modvat credit under Rule 57Q because they functioned as accessories or components of the plant. The analysis turned on serial No. 5 of the Rule 57Q table, which allows credit for plant accessories and components, and on the tanks' operational role in preventing evaporation and leakage. The tanks were distinguished from equipment used merely to store inputs, and from cases where the relevant provision was not considered. On that basis, denial of credit was found unsustainable, and entitlement to Modvat credit was affirmed.

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Issues: Whether storage tanks used for storing manufactured industrial gases qualify for Modvat credit as capital goods or as accessories or components of the plant under Rule 57Q of the Central Excise Rules.

Analysis: The tanks were specially designed for storage of industrial gases and were essential to prevent evaporation and leakage. The decision turned on the scope of serial No. 5 of the table under Rule 57Q of the Central Excise Rules, under which accessories or components of the plant are eligible for credit. The facts were distinguished from cases involving tanks used for storage of inputs or from cases where the relevant provision was not considered.

Conclusion: The storage tanks were eligible for Modvat credit as capital goods within the ambit of Rule 57Q of the Central Excise Rules, and the denial of credit was not sustainable.

Final Conclusion: The assessee succeeded in establishing entitlement to Modvat credit on the storage tanks used for industrial gas storage.

Ratio Decidendi: Storage tanks specially designed and used as essential accessories or components of a plant for storage of manufactured goods can qualify for Modvat credit under Rule 57Q of the Central Excise Rules.

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