Factory racks used for storage and internal movement qualify for Cenvat credit when integrally linked to manufacture.

Racks used within a factory for storage and internal transportation of finished goods were treated as capital goods eligible for Cenvat credit under Rule 2(a) of the Cenvat Credit Rules, 2004. The reasoning applied the broad construction of use connected with manufacture, recognising that items facilitating movement of inputs and finished goods can form part of the manufacturing chain when they are integrally linked to production and dispatch. On that basis, credit eligibility was affirmed and denial of credit was set aside in favour of the assessee.

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Issues: Whether racks used in the factory for storage and internal transportation of finished goods qualified as capital goods for availment of Cenvat credit under Rule 2(a) of the Cenvat Credit Rules, 2004.

Analysis: The definition of capital goods was read in the context of their use in the factory and the settled principle that expressions such as "in relation to manufacture" are to be construed broadly. Goods used for storing and transporting material within the factory can form part of the manufacturing chain where they facilitate movement of inputs and finished goods essential to production. The reasoning applied to similar factory-use items was held to support credit eligibility for the racks, as their function was integrally connected with the production and dispatch process.

Conclusion: The racks were held to be eligible for Cenvat credit, and the denial of credit was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded because the disputed racks were treated as goods used integrally in the manufacturing process, entitling the assessee to credit and consequential relief.

Ratio Decidendi: Goods used within the factory for storage and internal movement, where such use is integrally connected with manufacture, fall within the broader credit entitlement under the Cenvat scheme.

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