Cenvat credit on materials for immovable effluent treatment plant and storage tanks denied as they were not capital goods

Cenvat credit was denied on cement, CTD bars, channels and similar materials used to construct an effluent treatment plant and storage tanks because the materials were applied to civil construction, not to manufacture of the final products. The plant and tanks were immovable structures embedded in the earth and therefore did not answer the test of goods or marketability. Since capital goods under the Cenvat Credit Rules contemplate movable goods, and the materials were neither inputs nor capital goods in relation to manufacture, credit was not admissible. The order allowing credit was set aside in favour of the Revenue.

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Issues: Whether Cenvat credit was admissible on cement, CTD bars, channels and similar materials used in construction of an effluent treatment plant and storage tanks, and whether such plant and tanks could be treated as capital goods.

Analysis: The materials in question were found to have been used for civil construction work and not for the manufacture of the final products. The storage tanks and pollution control arrangement were constructed as immovable structures embedded in the earth and, therefore, did not satisfy the requirement of being goods. Under the Cenvat Credit Rules, capital goods contemplated movable goods, and the omission of plant from the definition of capital goods indicated a narrower legislative intent. The materials used in constructing such immovable structures were neither inputs nor capital goods in relation to the manufacture of the final products.

Conclusion: Cenvat credit was not admissible on the disputed items, and the order allowing the credit was set aside in favour of the Revenue.

Ratio Decidendi: Only movable goods that answer the test of goods and marketability can qualify as capital goods for Cenvat credit; materials used in civil construction of immovable structures do not qualify as inputs or capital goods.

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