Per Sidharath S. Sekhon :

This appeal preferred by the Department against the order in appeal passed by the Commissioner (Appeals).

2. Appearing on behalf of the Department the Ld. D.R. submits that the appeal is regarding the denial of Modvat credit on PVC pipes used outside the factory premises for the purposes of drawing water from the well situated 200 metres distance factory premises. This water is raw material for manufacturing of aerated water in the factory premises.

3. The Department contends that since the items which are used for drawing water are not used in the factory of the assessees or even not used within the registered premises of the assessees factory they are not eligible under Rule 57Q of the Central Excise Rules 1944. Shri Sudarsan, Ld. D.R. reiterates the departmental grounds in the present appeal and submits that the appeal be allowed.

4. Shri Nambirajan, Ld. Counsel, appearing on behalf of the Respondents submits that the well is situated only 200 metres away from the factory and is owned by the assessees and water is an essential ingredient for the manufacture of final product i.e. aerated water without this PVC pipes in question the water cannot be brought into the factory for use and therefore the credit is eligible. He cited the Larger Bench decision in the case of M/s. Vikas Industrial Gas Vs. CCE, Allahabad. In that case the issue was whether Modvat credit under Capital Goods claimed for a pump used for delivering water from the reservoir through the pipelines to the factory located a kilometer away from the factory was not entitled. In their case the issue is not the ground of pump but on the ground of credit on PVC pipes for the 200 metres which is connecting the well with factory premises is the question in the present appeal and this should be covered under the definition of 'precincts' used to denote as to what should be considered as the factory, as per the Section 2 (e) of the Central Excise Act 1944. Since the pipelines would be covered under the definition of factory as given in the Act, it is incorrect to submit that the use is not within the premises of the Respondents factory. He submits there are no other grounds in the said appeal and the same should be rejected.

5. We have considered the submissions made by both the sides and find that the pipeline 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. Therefore, we cannot find any other reason to uphold the Revenue appeal, since we find that the use of this subject pipeline is extension of the pipelines inside the factory to be used within the premises of the Respondents factory. We find that the case of Vikas Industrial Gases (supra) has been adequately distinguished by the Ld. Counsel and therefore we find no reason in the Revenue appeal. Accordingly we reject the Revenue appeal.