ORDER
S.L. Peeran, Member (J)
1. By impugned Order-in-Appeal No. 22/2003 (G) C.E., dated 9-5-2003, the Commissioner has denied Modvat credit in respect of HDPE pipes and fittings which were used to lay a water pipeline from the pump house located about 4 km to the factory premises. He also denied Modvat credit in respect of steel inputs utilized in the construction of staff building, dispensary, generator shed and also imposed penalty.
2. We have heard both the sides in the matter.
3. In so far as denial of Modvat credit on steel inputs used for construction of staff building, dispensary, generator shed is concerned, we are of the considered opinion that the Commissioner has rightly denied the Modvat credit in light of the judgments cited below. The appellant had paid the duty on these steel inputs of Rs. 3,30,642/- before the issue of show cause notice and hence penalty imposed on this ground to an extent of Rs. 3,30,642/- under Rule 571(4) is set aside.
4. In so far as HDPE pipes and fittings for carrying out the water to the factory is concerned, we notice from the assessee’s plea that the water is an essential raw material for manufacture of their final product is not disputed by the Revenue. Therefore, in light of the Apex Court ruling rendered in the case of CCE, Nagpur v. Manikgarh Cement Ltd. the benefit of Modvat credit is required to be extended. The Apex Court upheld the grant of Modvat credit in respect of rope connecting mines with factory located 4.2 km away to the factory. Also in the case of Finolex Industries Ltd. v. CCE, Pune-II reported in 2003 (58) RLT 220 (CEGAT-Mumbai) the Tribunal has granted Modvat credit on capital goods viz., moving arm of pipe used in jetty extended into the sea for unloading and transferring through pipeline the ethylene from tanker to tankers located inside the factory. The jetty extended up to 1/12 km away from the factory and it was held to be treated as part of the factory premises The tribunal in the case of J.K. Udaipur Ldyog Ltd. v. CCE, Jaipur-II reported in 2002 (147) E.L.T. 996 (Tri.-Del.) has granted the benefit of Modvat credit on capital goods viz., ropeway used outside the factory for the purpose of transferring the crushed limestones from the mines located 5.8 km from the factory treating it as a part of ropeway inside the factory. In the case of Varalakshmi Sugars Ltd, v. CCE, Hyderabad reported in 2001 (137) E.L.T. 96 (Tri. – Chennai), the tribunal again held that Modvat credit is eligible on capital goods viz., PVC pipes and fittings and HDPE pipes and fittings. The Tribunal again in the case of CCE, Chennai v. Pepsico has treated PVC pipes used outside the factory for the purpose of drawing water from the well situated 200 m from factory. The Apex Court in the case of Jaypee Rewa Cement v. CCE, M.P , it has been held that the inputs need not be utilized only within the factory premises in terms of erstwhile Rule 57A of C.E. Rules, 1944. Thus, noting the explanation contained in Rule 57A ibid, the Apex Court held that the explanation is merely meant to enlarge the meaning of the word ‘input’ and does not in any way restrict the use of input within the factory premises nor does it require the inputs to be brought into the factory premises at any point of time.
5. Applying the ratio of the above noted judgments, the plea for grant of Modvat credit on HDPE pipes is allowed. The impugned order is modified to the extent indicated in this order.
(Operative portion of this order was pronounced in open Court on conclusion of hearing)