Pollution control equipment qualified as capital goods for Modvat credit because effluent treatment formed part of manufacture.

Pollution control equipment was treated as capital goods eligible for Modvat credit under Rule 57Q(1) because effluent treatment and pollution control facilities were regarded as an essential and integral part of the manufacturing process. The Tribunal followed the Supreme Court's reasoning that apparatus used for effluent treatment forms part and parcel of manufacture, and applied the same approach in later Tribunal decisions. Although Notification No. 14/96-C.E. (N.T.) was noted, the applicable legal position during the relevant period and the binding Supreme Court principle governed the result, so the Revenue's challenge failed.

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Issues: Whether pollution control equipment qualified as capital goods for the purpose of Modvat credit under Rule 57Q(1) of the Central Excise Rules, 1944.

Analysis: The Tribunal applied the principle that treatment of effluents and pollution control facilities form an essential and integral part of the manufacturing process. It relied on the Supreme Court's view that apparatus used for effluent treatment is part and parcel of manufacture, and followed the same approach in later Tribunal decisions. The change introduced by Notification No. 14/96-C.E. (N.T.) was noted, but the present dispute was decided on the basis of the applicable legal position during the relevant period and the binding nature of the Supreme Court's reasoning.

Conclusion: Pollution control equipment was held eligible for Modvat credit under Rule 57Q(1), and the Revenue's challenge failed.

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