Cenvat credit on silo construction materials upheld where storage structures formed part of the manufacturing set-up.

Cenvat credit on cement and steel used to construct silos for storing cement and raw materials was admissible because the silos formed part of the manufacturing set-up and a functional component of the continuous manufacturing process. Credit could not be denied merely because the structure was embedded to earth or otherwise immovable when the inputs were used for a plant component connected with manufacture. Authorities relying on tower-part and prefabricated-building cases were distinguished as factually inapplicable, and the disallowance was held unsustainable.

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Issues: Whether Cenvat credit was admissible on cement and steel used in the construction of silos intended for storage of cement and raw materials in the course of manufacture.

Analysis: The dispute turned on whether the silos formed part of the manufacturing set-up so that the inputs used for their construction could qualify for credit. The construction materials were used to create storage facilities for cement and raw materials within the continuous manufacturing process. The Tribunal relied on binding Karnataka High Court decisions holding that credit cannot be denied merely because the item constructed is embedded to earth or is an immovable structure, where the inputs are used for a functional plant component connected with manufacture. The contrary reliance on cases relating to tower parts and prefabricated buildings was held inapplicable on facts.

Conclusion: Cenvat credit on cement and steel used for construction of silos was admissible and the disallowance was unsustainable.

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