Cenvat credit on duty-paid components used to install capital goods was allowed despite contractor-led erection and commissioning.

Cenvat credit was admissible on duty-paid components and parts supplied by a contractor, because they were invoiced to the assessee, used to assemble and install capital goods, and ultimately brought into the assessee's factory premises for the sugar plant. The tribunal applied the Cenvat Credit Rules to hold that contractor-led erection and commissioning did not by itself defeat credit where the statutory scheme permitted credit on components used for installation of capital goods. Earlier decisions on similar facts were followed, and the demand, penalty and interest were set aside.

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Issues: Whether Cenvat credit was admissible on duty-paid components and parts supplied by a contractor and assembled at the assessee's factory site for setting up a sugar plant.

Analysis: The components and parts were purchased or manufactured by the contractor, invoiced in the name of the assessee as consignee, and were ultimately assembled and installed in the assessee's premises. The reasoning applied the principle that, under the Cenvat Credit Rules, components and parts used for installation of capital goods in the manufacturer's factory are eligible for credit, even if the contractor undertook erection and commissioning. The earlier decisions on similar facts were followed, and the absence of an express provision like the earlier rule for job-worker cases was held not to defeat credit where the statutory scheme otherwise permitted it.

Conclusion: The credit was admissible to the assessee, and the demand, penalty, and interest were set aside.

Ratio Decidendi: Where duty-paid components and parts are used to assemble and install capital goods in the assessee's factory premises, Cenvat credit is admissible to the assessee even if a contractor undertakes the erection and commissioning.

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