Modvat credit for plant pipes upheld where stainless steel pipes formed an integral, functionally connected part of manufacturing machinery.

Stainless steel pipes used to interconnect reactors, scrubbers, heat exchangers and other equipment at different elevations within the plant were treated as capital goods for Modvat credit under Rule 57Q because they formed part of the plant and were functionally connected with the manufacturing process. Applying its earlier view that pipes and fittings used for the flow of media within a plant qualify when integral to production, CEGAT held that denial of Modvat credit was not sustainable and the assessee was entitled to the credit.

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Issues: Whether stainless steel pipes used for interconnecting equipment and machinery in the factory were eligible for Modvat credit as capital goods under Rule 57Q of the Central Excise Rules.

Analysis: The pipes were found to be used for connecting reactors, scrubbers, heat exchangers and other equipment located at different elevations in various sections of the project. On those undisputed facts, the Tribunal applied its earlier view that pipes and fittings used for the flow of various media within the plant are eligible for Modvat credit when they form part of the plant and are functionally connected with the manufacturing process.

Conclusion: The denial of Modvat credit was not sustainable and the assessee was entitled to the credit.

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