Pollution control equipment integral to manufacturing operations can qualify for Modvat credit as capital goods.

A waste water clarification plant used to purify and recycle water in the manufacturing process was treated as capital goods for Modvat credit under Rule 57Q. The reasoning accepted that equipment installed to remove hazardous substances and prevent pollution can qualify where it is also necessary for factory operations, including the recycling of purified water back into manufacture. On that basis, pollution control equipment integral to production was regarded as within the scope of capital goods for Modvat purposes.

---

---

Issues: Whether a waste water clarification plant used for purification and recycling of water in the manufacturing process is eligible as capital goods for Modvat credit under Rule 57Q.

Analysis: The plant was found by the authorities to be installed to prevent pollution and remove hazardous substances from effluent. It was also treated as necessary for the functioning of the factory, since purified water was recycled for use in manufacture. In this context, the reasoning accepted the principle that pollution control equipment, when essential to plant operations, can fall within the scope of capital goods for Modvat purposes.

Conclusion: The waste water clarification plant was held eligible for Modvat credit as capital goods under Rule 57Q, in favour of the assessee.

---