Cenvat credit on inputs for storage tank construction affirmed where the tank qualified as capital goods

Cenvat credit was treated as available on cement and M.S. bars used to construct a storage tank used in the factory for manufacturing purposes. Rule 2(a) of the Cenvat Credit Rules, 2002 specifically includes a storage tank within the definition of capital goods, and goods used to manufacture such capital goods are regarded as inputs for credit purposes. On the stated facts, the materials used for the tank retained credit eligibility, and the objection based on masonry work did not defeat the claim. The stated conclusion was that denial of credit was unsustainable and the assessee was entitled to consequential relief according to law.

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Issues: (i) Whether cement and M.S. bars used in the construction of a storage tank were eligible for Cenvat credit under the Cenvat Credit Rules, 2002.

Analysis: Rule 2(a) of the Cenvat Credit Rules, 2002 specifically includes storage tank within the definition of capital goods. Goods used in the manufacture of capital goods which are themselves used in the factory are treated as inputs for the purpose of Cenvat credit. The materials in question were used for constructing storage tanks deployed in the factory in relation to manufacture of the final product, and the exclusion urged for masonry work did not alter the credit eligibility in the present facts.

Conclusion: The appellant was eligible for Cenvat credit on cement and M.S. bars used for the storage tank.

Final Conclusion: The denial of credit was unsustainable and the departmental appeal succeeded, with consequential relief to follow according to law.

Ratio Decidendi: Where a storage tank is specifically treated as capital goods, inputs used for its manufacture are eligible for Cenvat credit if the tank is used in the factory in relation to manufacture of final products.

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