Cenvat credit on external pipeline pipes allowed where they brought essential input to the factory for manufacture.

Cenvat credit was held admissible on coated pipes used in a gas pipeline bringing natural gas to the factory, because the pipes formed part of the system supplying an essential input for manufacture. The Tribunal followed earlier decisions recognising that pipes used to bring water or other necessary material from an external source to the factory are employed in or in relation to manufacture, even if located outside factory premises. Credit could not be denied solely because the pipes were not physically within the factory, and the denial of credit was unsustainable.

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Issues: Whether Cenvat credit was admissible on coated pipes used as replacements in a gas pipeline transporting natural gas to the appellant's factory for manufacture of finished goods.

Analysis: The issue turned on whether the pipes, though laid outside the factory premises, were used in a pipeline directly connected with bringing an essential input to the factory for manufacture. The Tribunal noted that the issue had already been considered in earlier decisions, including the view that credit is available where pipes are used to bring water or other necessary material from an external source to the factory and are thus employed in or in relation to manufacture. Following that settled reasoning and the ratio relied upon by the earlier decisions, the Tribunal held that the factual position in the present matter was to those cases and that the credit could not be denied merely because the pipes were not physically within the factory.

Conclusion: Cenvat credit on the coated pipes was admissible and the denial of credit was unsustainable.

Ratio Decidendi: Cenvat credit is allowable on pipes forming part of a pipeline that brings an essential material to the factory for manufacture, even if the pipes are located outside the factory, where they are used in or in relation to manufacture.

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