CENVAT credit on factory-use goods allowed under Jawahar Mills principle, with end-use restrictions found unsustainable.

CENVAT credit on duty-paid items such as prime movers, pump parts, spares, testing equipment and heating elements used in the factory was held admissible. Applying the principle in Jawahar Mills Ltd., the department could not deny credit merely on a restrictive view of end-use once the goods were received and duty-paid. The denial based on the manner of use was therefore unsustainable, and credit on the disputed items was allowed in favour of the assessee.

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Issues: Whether credit was admissible on the disputed goods used as prime mover, pump parts, spares, testing equipment, heating element and similar items in the manufacturer's factory.

Analysis: The eligibility of such credit stood governed by the principle laid down by the Supreme Court in Jawahar Mills Ltd., under which the department cannot deny credit merely on a restrictive view of end-use once the goods are received and duty-paid. The lower authority's denial based on the manner of use could not be sustained.

Conclusion: Credit on the disputed items was admissible and the denial was set aside in favour of the assessee.

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