Cenvat credit on fabrication inputs used for storage tanks is admissible when the tanks support manufacture of final products.

Cenvat credit was admissible on iron and steel items used to fabricate storage tanks, because goods used in the manufacture of capital goods that are in turn used in producing final products fall within Rule 2 of the Cenvat Credit Rules, 2002. The credit could not be denied merely because the items were not directly used in the final product; the storage tanks formed part of the plant used in manufacturing sugar and molasses. Denial of credit was therefore unsustainable, and the assessee was entitled to the credit.

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Issues: Whether Cenvat credit was admissible on iron and steel items used in fabrication of storage tanks which were in turn used in the manufacture of sugar and molasses.

Analysis: The items were admittedly used for fabrication of storage tanks. Under Rule 2 of the Cenvat Credit Rules, 2002, inputs include goods used in the manufacture of capital goods which are further used in the manufacture of final products. As the storage tanks were part of the plant and were used in the manufacture of the final product, the credit could not be denied merely because the iron and steel items were not directly used in the final product.

Conclusion: The denial of credit was unsustainable and the assessee was entitled to Cenvat credit on the disputed items.

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