Capital goods treatment for pulp transport pumps supports Modvat credit for paper manufacturing plant components.

Power driven pumps used within a paper manufacturing plant to transport pulp between stages of production were treated as capital goods under Rule 57Q because they formed an integral part of the plant and assisted the manufacture process, even though they did not themselves change the raw material. The reasoning followed the principle earlier applied to cranes, wires and cables used as necessary manufacturing aids. On that basis, such pumps fell within the scope of plant components covered by the rule, and Modvat credit was available on the duty paid on them.

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Issues: Whether power driven pumps used for transporting pulp within the manufacturing plant of paper qualified as capital goods under Rule 57Q and entitled the assessee to Modvat credit on the duty paid thereon.

Analysis: The pumps were used at various stages of the plant to move pulp from one machine to another during manufacture of paper. Goods such as cranes, wires and cables had earlier been treated as capital goods where their use was necessary for manufacture, even though they did not themselves bring about a change in the raw material. On the same principle, the pumps were integral to the transport and processing of pulp within the plant. Since Rule 57Q also included components of the assessee's plant within capital goods, the pumps used within the paper plant were components of that plant and fell within the rule.

Conclusion: The pumps were capital goods under Rule 57Q and the assessee was entitled to Modvat credit on the duty paid on them.

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