Cenvat credit on inputs for material handling equipment was admissible, and Rule 6(1) did not bar the claim.

Cenvat credit on M.S. Rod used to manufacture tote boxes was admissible because the tote boxes functioned as material handling equipment within the factory for carrying, loading, unloading and heat-treatment movement of goods. The tote boxes were treated as capital goods used in the manufacturing stream, so the M.S. Rod qualified as input used in the manufacture of capital goods further used in the factory. Denial of credit under Rule 6(1) was unsustainable because the show cause notice proceeded on a different basis and the rule applies where the final product is cleared under exemption, which was not the position here. The credit denial was therefore set aside.

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Issues: Whether Cenvat credit was admissible on M.S. Rod used to manufacture tote boxes employed for handling and movement of goods within the factory, and whether denial of credit could be sustained on the footing that the tote boxes were exempted and therefore Rule 6(1) barred the credit.

Analysis: The M.S. Rod was used to manufacture tote boxes, and those tote boxes were used in the manufacturing stream for carrying, loading, unloading, and heat-treatment movement of goods within the factory. The tote boxes were treated as capital goods in the nature of material handling equipment, so the M.S. Rod qualified as input used in the manufacture of capital goods that were further used in the factory. On that basis, credit was admissible under the Cenvat Credit Rules, 2004. The denial based on exempted tote boxes under Rule 6(1) was not sustainable because the show cause notice had proceeded on a different premise and, in any event, Rule 6(1) applies where the final product is cleared under exemption, which was not the case here.

Conclusion: Cenvat credit on M.S. Rod was held admissible, and the order denying the credit was set aside in favour of the assessee.

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