Per Shri V.P. Gulati :

The issue in the appeal relates to benefit of MODVAT Credit in respect of pipes which are used for laying pipe lines for transfer of materials from one equipment to the other. The lower original authority has held that the pipe used is transportation of the material and it cannot be viewed as producing, processing or bringing about any change in any substance for the manufacture of the final product, in terms of the explanation under sub para 1 (a) of Rule 57Q, under which the scope of the term capital goods for MODVAT Purposes has been defined. The lower appellate authority however, has held that the scope of the term capital goods as set out under Rule 57Q is wide enough that pipe can be taken to be covered within the ambit of the term accessories or parts.

2. The Revenue is aggrieved of the finding of the CCE (A) and the following ground has been urged in this regard :

2. The item "Pipelines" are only equipments used for conveyance of the materials having independent function and cannot be treated as part and parcel of a plant.

3. It is evident that the Pipelines are not used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product and they do not conform to the meaning given for capital goods in explanation (1) (a) under Rule 57Q.

4. The item "Pipelines" are not spares or components accessories for the plant conforming to the meaning given for capital goods in explanation (1) (a) under Rule 57Q. Therefore, the said goods are again not conforming to the meaning given for capital goods in the explanation (1) (b) under Rule 57Q.

5. In 1994 (70) ELT 75 (T) Telco Vs. CCE, Pune, the Tribunal decided that material handling equipments and measuring equipments were not covered by the exclusion clause in the Notification No. 217/86 dated 2.4.86. The relevant exclusion clause was as follows:-

"For the purposes of this Notification, `inputs' not include;

(i) machines, machinery, plant, equipments, apparatus tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products".

The definition to capital goods contained in Rule 57Q in Explanation (1) (a) is identically worded as the explanation to Notification No. 217/86 interpreted by the Tribunal in the above decision. Therefore the ratio of the above decision squarely applies to the definition to capital goods as contained in Rule 57Q, Explanation (1) (a). The amendment made in Rule 57S cannot affect the definition to capital goods as contained in Rule 57Q and the goods involved which are not used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products are not eligible for credit as capital goods under Rule 57Q, which is squarely applicable to this case also. In the instant case the item "Pipelines" used only for conveyance of the materials and thus by not satisfying the conditions laid down to the explanation 1 (a) or 1 (b) to Rule 57Q.

3. The learned SDR for the department has referred us to the order of this Tribunal bearing No. 646/96 and urged that in the light of this order, the pipelines used for conveyance of material cannot be considered as capital goods as defined under Rule 57Q explanation 1 (a) & (b). He has further pleaded that the definition capital goods clearly envisages only such of those capital goods which are utilised for producing, processing or for bringing about any change in any substance, will be eligible for the benefit of MODVAT Credit. Admittedly the pipes used in the present case are in different lengths and are provided as a connection between different equipments and are used as conduits for transfer of the liquids.

4. The Chartered Accountant appearing for the Respondents has pleaded that the pipes are part of the plant and therefore, should be given the benefit of MODVAT Credit. He has fur