Functional necessity and plant integration can make a storage tank eligible for Modvat credit as a component or accessory.

A storage tank used to store gases in the manufacture of oxygen and nitrogen qualified for Modvat credit because it was integral to the plant and functionally necessary for storing gases for use in production. Revenue authorities' precedents were distinguished on the facts, as those items lacked a sufficient nexus with manufacture or were used only for unrelated storage. Applying the earlier order in the assessee's own case, the tank was treated as a capital good and also as a component or accessory under Rule 57Q. The Revenue's challenge failed, and the grant of Modvat credit was sustained.

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Issues: Whether the storage tank used for storing gases in the course of manufacture of oxygen and nitrogen was eligible for Modvat credit as capital goods or as a component/accessory under Rule 57Q.

Analysis: The storage tank was found to be integral to the plant, because the gases could not be stored for use in the manufacture of the final products without it. The decisions relied upon by the Revenue were distinguished on facts, as those items had no nexus with manufacture or were used only for storage unrelated to the final product. Following the earlier order in the assessee's own case, the tank was treated as falling within the capital goods scheme and as an eligible component/accessory.

Conclusion: The storage tank qualified for Modvat credit and the Revenue's challenge failed.

Final Conclusion: The appeal was rejected, and the grant of Modvat credit on the storage tank was sustained.

Ratio Decidendi: An item that is functionally necessary for storage of input or intermediate gases used in manufacture, and is integral to the plant, can qualify as a component or accessory for Modvat credit under Rule 57Q.

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