Cenvat credit on plant accessories and material handling equipment allowed where items had nexus with factory use

Items used for repair and maintenance of machinery, storage of liquid, as accessories to plant and machinery, and as material handling equipment were treated as eligible for Cenvat credit because they had the requisite nexus with factory use and fell within the statutory definition of input. Parts, components and accessories of eligible equipment were also covered, and items used in manufacturing capital goods for use in the factory were similarly accepted. On that basis, denial of credit was unsustainable and credit was held allowable on the disputed items.

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Issues: Whether the respondents were entitled to Cenvat credit on the disputed items used for repair and maintenance of machinery, storage of liquid, as accessories to plant and machinery, and as material handling equipment and parts.

Analysis: The items in dispute were examined in the light of their actual use and the settled position that control panels, laboratory equipment and material handling systems are eligible for credit, and that parts, components and accessories of such eligible equipment are also entitled to credit. The items were found to be used for repair and maintenance of machinery, storage of liquid, as accessories to plant and machinery, and for material handling purposes. Items used in the manufacture of capital goods to be employed in the factory for further production were also treated as satisfying the definition of input. On that basis, the denial of credit on the disputed items was found unsustainable.

Conclusion: The respondents were held entitled to Cenvat credit on the disputed items and the Revenue's appeal was rejected.

Ratio Decidendi: Items having nexus with maintenance of machinery, storage, plant accessories, material handling, or manufacture of capital goods used in the factory qualify for credit where the statutory definition of input is satisfied.

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