Cenvat credit on capital goods upheld for adjacent unregistered premises used in integrated manufacturing and job work.

Cenvat credit on capital goods may remain admissible where the goods are installed in adjacent unregistered premises if those premises are part of the assessee's integrated manufacturing arrangement and the goods are used for job work connected with the final product cleared from the main unit. The Tribunal applied the "used in the factory" principle broadly, holding that physical location outside the registered premises does not defeat credit when the capital goods are deployed in the manufacturing process and are not diverted to extraneous use. On those facts, credit was allowed and the Revenue's challenge failed.

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Issues: Whether Cenvat credit on capital goods is admissible when the capital goods are installed in adjacent unregistered premises and used for job work in the course of manufacture of the final products cleared from the main unit.

Analysis: The credit was denied on the premise that the capital goods were not installed within the registered premises of the main unit. The decisive facts were that the adjacent premises were part of the respondent's manufacturing arrangement, the capital goods were used for job work connected with the main unit, and the final products were cleared on payment of duty from the main unit. The Tribunal followed the principle that the expression "used in the factory" is satisfied where the capital goods form part of the manufacturing activity of the assessee and are employed in an integrated process for the final product, even if located in nearby unregistered premises, so long as the goods are not diverted or used extraneously.

Conclusion: Cenvat credit on the capital goods was admissible and the Revenue's appeal failed.

Ratio Decidendi: Capital goods used as part of an integrated manufacturing process for the assessee's final product remain eligible for credit even if installed in adjacent unregistered es, provided they are used for the manufacture of the duty-paid final products of the main unit.

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