TAMIL NADU NEWSPRINT AND PAPERS LTD. Vs. CCE

JUDGEMENT

(1.) THE short question arising for consideration in appeal is whether capital goods credit was available to "KECL make Electrostatic Hydraulic Oil cleaner" which was used by the appellants as pollution control equipment. The said equipment was used as a spare to Electrostatic precipitator which was, in turn, used to filter the unburnt fuel particles for pollution control. The lower appellate authority has denied Modvat credit on the equipment on the ground that it was used as a pollution control equipment prior to 23.7.1996 and hence not eligible for capital goods credit under Rule 57Q. Prior to 23.7.1996, capital goods credit was available to those capital goods which were used for producing or processing of any goods or bringing about any change in any substance for the manufacture of final product. The lower appellate authority has held that the equipment in question, having been used for pollution control purpose, cannot be considered to have been used for producing or processing of any goods or bringing about any change in any substance for the manufacture of final products. This view taken by the Commissioner (Appeals) is under challenge in the present appeal on the strength of the Supreme Court's Judgment in Indian Farmers Fertilizer Cooperative Ltd. v. CCE Ld. Counsel for the appellants has relied on para 9 of the cited judgment as also on Final Order No. 1073/04 dated 23.12.2004 passed by this Bench in Appeal No. E/837/2003. Ld. SDR has reiterated the findings of the Commissioner (Appeals).

(2.) AFTER considering the submissions, I find that the reasoning adopted by the lower appellate authority for denying capital goods credit to the subject equipment is not sustainable in view of the Supreme Court's judgment in the case of IFFCO v. CCE (supra), wherein it was held that treatment of effluents from a plant was essential and integral part of the process of manufacture of final products (chemicals and fertilizers). In the case considered by the Apex Court, the question was whether raw naphtha which was used to manufacture ammonia which was, in turn, used in the effluent treatment plant was eligible for the benefit of an exemption Notification. The Revenue had argued that, as the effluent treatment, which was a part of pollution control, was a post -manufacture activity, naphtha could not be considered to have been used in the process of manufacture of end product. This argument was rejected by their lordships and it was held that treatment of effluents for pollution control was also a part of the manufacturing process. This ruling supports the present appeal. It is also noticed that, in Final Order No. 1073/04 ibid, capital goods credit was allowed in respect of an equipment used for removal of waste materials generated in sugar factory, after holding that removal of waste materials was a part of the manufacture of sugar.