Capital goods credit allowed for Chapter 85 items used in factory fabrication, despite erection of an immovable paint shop.

Capital goods credit was admissible where the items fell under Chapter 85 and were used in the factory, even though they were used to fabricate and erect a paint shop fixed to the earth. The immovable character of the finished structure was held irrelevant to eligibility for credit on the inputs or capital goods received and used in the factory. As the tariff classification and factory-use requirements were satisfied, denial of credit on the ground that the paint shop became immovable could not be sustained.

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Issues: Whether capital goods credit was admissible on items falling under Chapter 85 of the Central Excise Tariff that were used for fabrication and erection of a paint shop fixed to the earth.

Analysis: The decisive considerations for capital goods credit were whether the goods fell within the specified tariff chapters and whether they were used in the factory. The fact that the goods were ultimately used to fabricate or erect plant or machinery that became fixed to the earth did not, by itself, take away the entitlement to credit. The nature of the finished structure as immovable property was held to be irrelevant to the credit eligibility of the inputs or capital goods received and used in the factory. Since there was no dispute that the goods were covered by Chapter 85 and were used in the factory, denial of credit on the ground that the paint shop was immovable could not be sustained.

Conclusion: The credit was held admissible and the assessee succeeded on this issue.

Ratio Decidendi: For capital goods credit, the relevant test is the statutory coverage of the goods and their use in the factory, not whether the end use results in an immovable structure fixed to the earth.

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