Customs, Excise and Gold Tribunal - Mumbai
Vardhman Acrylics Ltd. vs Commissioner Of C. Ex. And Cus. on 25 October, 2005
ORDER T.V. Sairam, Member (T)
1. In this case Modvat credit was allowed by the department in respect of PVC pipes used for carrying untreated water upto water treatment plant. Only in respect of those pipes which carry the treated water for growing plants (as per the order of the Hon'ble High Court of Gujarat and also on the basis of 'No Objection Certificate' issued by the Gujarat Pollution Control Board) Modvat facility was denied. The limited issue, therefore, is whether Modvat credit can be allowed in respect of those pipes which carry treated water for agricultural purposes situated within the factory compound and as per the directions of the Gujarat High Court/Pollution Control Board.
2. The learned Advocate referred to the provisions of Rule 57Q as it existed in 1994 and also as it exists after 1997. In 1997 the modified Rule 57Q uses the following expression :-
The goods ... used in the factory of manufacturer of final products". According to the learned Advocate, in 1997 the rules has been made more flexible and broader than what it was in 1994.
4. The learned Advocate also referred to the Hon'ble Supreme Court case - Jawahar Mills as quoted in 2004 (178) E.L.T. 472 (Tribunal), Maris Spinners Ltd. case which reads as follows :
It is clearly held that the goods specified in explanation 1 (c) for availing Modvat credit as capital goods need not be used in the manufacture of the final product and the only requirement is that they should be used in factory of production.
In yet another judgment passed by the Tribunal in the case of Shriram Alkali & Chemicals, it has been held that Rule 57Q has therefore, wide in scope permitting any use in the factory and not necessarily for manufacture of final product.
5. In the case of Toyota Kirloskar Motor Ltd. v. CCE, Bangalore-III 2002 (50) RLT 942 (CEGAT) the Tribunal held that the scope of availing Modvat credit has been enlarged by amending Rule 57Q issuing Notification No. 11/95 dated 16-3-98 to avail Modvat credit. Earlier to the amendment capital goods must be used in or in relation to the manufacture of finished product to avail credit". In another order by the Tribunal in the case of Hindustan Coca Cola Beverages Pvt. Ltd. v. CCE, Thane-I 2005 (69) RLT 547 the following observations were made :-
PVC pipes used outside the factory for the purpose of drawing water from a well situated 200 meters from the factory was only an extension of the pipelines inside the factory to be used within the factory premises and hence Modvat credit is permissible
6. In the case of CCE, Chennai v. Pepsico India Holding Ltd. the following observations were made by the Tribunal:
We find that the pipelines can be considered in the factory in this case, it would be covered by the definition of the word 'factory' under Section 2(e) of the Central Excise Act, 1944.
Section 2(e) of the Act reads as under :-
Factory means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or any part of which in any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on.
It is emphasized by the learned Jt. CDR here that the expression 'factory' is related to the manufacturing process connected with the production of goods". He also reiterated the findings of the Dy. Commissioner in his order dated 14-3-2002 which reads as follows :-
I find that these pipes are used for converting treated water from treatment plant. Therefore, these are not required for treatment plant, but after the process of treatment of effluent treatment plant the waste is taken out from these pipes and used for agricultural purposes. Therefore, the credit taken amounting to Rs. 2,64,807/- on these pipes is not entitled for availing Modvat credit being not used for manufacture of finished goods in the plant nor used in effluent treatment plant.
7. The learned Advocate for the appellant informed that there is an obligation on them from the Gujarat Pollution Control Board which has issued direction to them that the treated effluent water confirming to be standard prescribed by them shall be utilized on the land for gardening/plantation. Copy of 'NOC' dated 22-1-99 issued by Gujarat Pollution Control Board also refers to an order by the Hon'ble High Court dated 29-12-98 in this regard. According to this order, the applicants shall operate the industrial plant at 50% production capacity for a period of three months and the effluent plant shall be treated to conform to irrigation standard as prescribed.
8. I have examined the case records and heard both sides. I am of the firm view that it may not be possible for the appellant to continue manufacturing operation had they not complied with their obligation with the Pollution Control authorities. Further, they have made out a clear case that the subject goods, namely PVC pipes have been used within the premises of their factory only and not elsewhere. This fact is also not disputed by the Department. Considering all these in totality, I am of the view that the Modvat credit denied to them on such pipes by the lower authority should be made available to them. I further observe that Section 2(e) of the Act defines the factory as the premises including the precincts wherein manufacturing process is ordinarily carried out. It has been stated by the learned Advocate that the ground plan of the factory has been duly approved by the Central Excise Authorities and the PVC pipes have been laid well within the approved ground plan. In view of this and also in view of the fact that the process of manufacture here is vitally interlinked with the obligations under the Pollution Control Law, I set aside the impugned order of the Commissioner (Appeals) in so far as it pertains to the credit disallowed in respect of PVC pipes used within the factory for agriculture use, for conveyance of treated water from water treatment plant and grant consequential benefit to the appellant. Appeal is thus partially allowed, as the other issue in the appeal, namely denial of Modvat in respect of pumps, is not pressed by the Id. Advocate.
(Pronounced in the open Court)