Cenvat credit on inputs for storage tanks used as capital goods justified full waiver of pre-deposit and stay of recovery

Storage tanks are treated as capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004, and inputs used in their manufacture may qualify for credit under Rule 2(k) when those capital goods are used in the factory. Their use in the manufacturing process and their character as immovable property did not, by itself, remove the case from the credit scheme. On that basis, the appellant was found to have made out a prima facie case for full waiver of pre-deposit, and recovery was stayed pending disposal of the appeal.

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Issues: Whether the appellant made out a prima facie case for waiver of pre-deposit and stay of recovery on the ground that Cenvat credit was admissible on inputs used in the manufacture of storage tanks treated as capital goods.

Analysis: Rule 2(a) of the Cenvat Credit Rules, 2004 treats storage tanks as capital goods. Rule 2(k) further recognises that input includes goods used in the manufacture of capital goods which are further used in the factory of manufacture. On that basis, the fact that the storage tanks were used in the manufacturing process and were immovable property did not, by itself, take the case outside the credit scheme. The Tribunal also found support in the Karnataka High Court decision relied upon by the appellant.

Conclusion: The appellant established a prima facie case for complete waiver of pre-deposit, and recovery was stayed during pendency of the appeal.

Final Conclusion: Interim relief was granted in full in favour of the appellant, leaving the appeal to be heard on merits.

Ratio Decidendi: Inputs used in the manufacture of capital goods that are themselves used in the factory are eligible for Cenvat credit, and storage tanks fall within the definition of capital goods under the relevant rules.

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