Cenvat credit on steel inputs used to fabricate factory storage silos is available despite immovability objections.

Duty-paid steel plates and sheets used to fabricate clinker silos were eligible for Cenvat credit because the materials were used in the manufacture of capital goods further used in the factory. Storage tanks fall within the definition of capital goods, and Explanation 2 to Rule 2(k) treats inputs used to manufacture such capital goods as eligible inputs. The fact that the fabricated silos were said to be immovable or non-excisable was held irrelevant to the credit entitlement. On that basis, denial of Cenvat credit on the steel inputs was unsustainable.

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Issues: Whether duty paid steel plates and sheets used to fabricate clinker silos, which are storage tanks used within the factory, qualify for Cenvat credit as inputs under the Cenvat Credit Rules, 2002.

Analysis: The credit was denied on the premise that the clinker silos were immovable and hence not excisable, but the decisive question was whether the inputs were used in the manufacture of capital goods further used in the factory. Storage tanks fall within the definition of capital goods, and the materials in question were admittedly used to fabricate such silos for use in the factory. Under Explanation 2 to Rule 2(k), inputs include goods used in the manufacture of capital goods which are further used in the factory of production. The dutiability or excisability of the fabricated capital goods was held to be irrelevant for this purpose.

Conclusion: The inputs used in fabricating the clinker silos were entitled to Cenvat credit, and the credit denial was unsustainable.

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