Modvat credit on factory-located PVC pipes used for pollution control-linked water conveyance was held admissible.

Modvat credit on PVC pipes laid within the approved factory premises for conveying treated water was admissible where their use was confined to the factory and was integrally connected with manufacturing activity through compliance with pollution control directions. Applying Rule 57Q and the statutory definition of "factory" under Section 2(e) of the Central Excise Act, 1944, the pipes were treated as goods used in the factory, so denial of credit was not sustainable. The disallowance was set aside. The separate challenge relating to pumps was not pursued.

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Issues: Whether Modvat credit was admissible on PVC pipes used within the factory premises for conveyance of treated water for agricultural use in compliance with pollution control directions.

Analysis: The credit claim was examined in the light of Rule 57Q and the statutory definition of "factory" under Section 2(e) of the Central Excise Act, 1944. The pipes were laid within the approved factory plan, their use was confined to the factory , and the activity was integrally connected with the manufacturing operation because compliance with pollution control obligations was necessary for continuance of production. On that footing, the pipes were treated as goods used in the factory, and the denial of credit was not sustainable. The separate challenge relating to pumps was not pursued.

Conclusion: Modvat credit on the PVC pipes was admissible and the disallowance was set aside.

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