Cenvat credit on boiler components used to fabricate a power plant system was held admissible for sponge iron manufacture.

Cenvat credit was held admissible on duty-paid boiler components received in the factory and used for fabrication and assembly of the boiler within the factory premises. The relevant credit scheme covered capital goods as well as their components, and the fact that the steam and electricity generated were not themselves dutiable did not defeat eligibility. Following the same principle applied in a similar power-plant installation context for sponge iron manufacture, the assessee was entitled to avail the credit on the components used in setting up the boiler system.

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Issues: Whether Cenvat credit was admissible on duty paid components of a boiler received in the factory and used for fabrication and assembly of the boiler as part of a power plant for generation of steam and electricity for use in manufacture of sponge iron.

Analysis: The components of the boiler were received in the factory and were used for fabrication and assembly within the factory premises. At the relevant time, the credit scheme covered not only capital goods but also their components. The objection that the steam and power generated were not dutiable did not displace eligibility, as credit had been allowed in a similar case involving capital goods used in installation of a power plant for manufacture of sponge iron.

Conclusion: Cenvat credit on the duty paid components of the boiler was admissible and the assessee was entitled to the credit.

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