Modvat credit for capital goods used outside factory premises was allowed where the plant formed part of the manufacturing process and was disclosed.

Modvat credit on capital goods was admissible where a chlorine evaporation plant was installed at another premises but was connected by pipelines, used in the manufacture of epichlorohydrin, and treated as part of the integrated manufacturing set-up. The plant's location had already been disclosed in the declaration, so the allegation of suppression failed and denial of credit on that ground was not sustained. The principle applied was that capital goods need not be physically located within the factory premises if they are used in the manufacture of the final product and their use is properly disclosed.

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Issues: Whether Modvat credit on capital goods was admissible when the chlorine evaporation plant was installed in another premises but was used in the assessee's manufacturing process, and whether the credit could be denied on the ground of inadequate declaration or suppression.

Analysis: The declaration filed by the assessee disclosed the location of the chlorine evaporation plant at SPIC-HCD, and the lower authority had accepted that fact. The plant was installed with consent of the other unit, was connected by pipelines, and was used for manufacture of the final product epichlorohydrin. On these facts, the plant was treated as part of the assessee's manufacturing set-up for the purpose of Modvat credit. The order also relied on the settled principle that input or capital goods need not be used within the factory premises if they are used in the manufacture of the final product. The allegation of suppression was negated because the relevant location had already been disclosed in the declaration.

Conclusion: Modvat credit on the capital goods was admissible, and the Revenue's challenge to the grant of credit failed. The denial on the basis of alleged non-disclosure or suppression was not sustained.

Ratio Decidendi: Capital goods used in the manufacture of final products remain eligible for Modvat credit even if installed outside the physical factory premises, so long as their use is disclosed and they form part of the integrated manufacturing process.

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