Cenvat credit on capital goods allowed for machinery used in nearby premises as part of the same manufacturing process.

Cenvat credit on capital goods remained admissible where machinery was shifted from the factory to a nearby rented premises for connected manufacturing operations carried on by the assessee itself. The movement was covered by challans, the premises formed part of the assessee's own manufacturing arrangement, and there was no allegation of suppression or fraud. The use of the machine was treated as integral to manufacture of the same final products, so denial of credit was unsustainable.

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Issues: Whether cenvat credit on capital goods was admissible when the machine was used in a nearby rented premises for part of the manufacturing process and its movement was covered by challans.

Analysis: The machine was removed from the factory to a nearby premises due to shortage of space and was used for connected manufacturing operations undertaken by the assessee itself. The goods and machine were moved under challans, the movement was within the assessee's own arrangement, and there was no allegation of suppression or fraud. The use of the capital goods was treated as part of the manufacturing activity of the registered factory, and the cited authority supported allowance of credit where machinery is used between the assessee's own units for manufacture of the same final products.

Conclusion: Cenvat credit on the capital goods was admissible and the denial of credit was unsustainable.

Ratio Decidendi: Capital goods used by the assessee in a nearby own premises as an integral part of the manufacturing process of the same final products, with movement duly covered by challans and without suppression of facts, remain eligible for cenvat credit.

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