Cenvat credit on worker safety gear allowed where footwear was essential for safe manufacturing operations

Cenvat credit on safety shoes used by factory workers was treated as admissible because the footwear was an essential safety requirement in a hot steel plant and was linked to the employer's statutory duty to protect worker health under welfare legislation. The denial based on a narrow view that the items were not directly used in manufacture was rejected, since the shoes enabled manufacturing activity to be carried on safely. The disallowance was therefore set aside and the credit allowed in favour of the assessee.

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Issues: Whether Cenvat credit could be denied on safety shoes used by workers in the factory on the ground that they were not used in or in relation to manufacture.

Analysis: Safety shoes were held to be an indispensable necessity for workers operating in a hot steel plant. The requirement was linked to the statutory duty to ensure the health of workers under Section 7A(2)(c) of the Factories Act, 1948. Since the footwear was required to comply with welfare legislation and to enable manufacturing activity to be carried on safely, the disallowance based only on a narrow manufacturing nexus was not justified.

Conclusion: Cenvat credit on safety shoes was held admissible and the disallowance was set aside, in favour of the assessee.

Final Conclusion: The appeal and stay application were allowed as the disputed items were treated as necessary for worker safety and for the manufacturing process in the factory.

Ratio Decidendi: Where an item is an essential safety requirement for workers and is mandated by welfare legislation for carrying on manufacture, it cannot be denied credit merely because it is not directly used in the manufacturing process.

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