Cenvat credit on fabrication materials allowed where the storage tank qualifies as capital goods under the rules.

MS angles and HR sheets used to fabricate a storage tank were held eligible for Cenvat credit because the storage tank is specifically treated as capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004. Once the end product is capital goods, steel items used in its fabrication qualify as inputs used in the manufacture of capital goods under Rule 2(k). Denial of credit on the ground that the materials did not fall under Chapter 72 of the Central Excise Tariff Act, 1985 was not sustainable, and the credit denial was set aside in favour of the assessee.

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Issues: Whether MS angles and HR sheets used for fabrication of a storage tank were eligible for Cenvat credit.

Analysis: Storage tank is expressly covered as capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004. Once the storage tank is treated as capital goods, steel items used in its fabrication are inputs used in the manufacture of capital goods and are eligible for credit under Rule 2(k) of the Cenvat Credit Rules, 2004. The denial of credit on the premise that the goods did not fall under Chapter 72 of the Central Excise Tariff Act, 1985 was therefore not sustainable.

Conclusion: The credit was admissible and the denial of Cenvat credit was set aside in favour of the assessee.

Ratio Decidendi: Materials used in the manufacture of capital goods are eligible as inputs for Cenvat credit where the resulting item is itself specifically treated as capital goods under the Cenvat Credit Rules, 2004.

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