CENVAT credit on fabrication materials and factory-linked services was largely allowed, despite immovable property objections.

CENVAT credit on MS items used to fabricate machinery, equipment and plant structures was treated as admissible where the materials were used in manufacture of eligible capital goods, even though the resulting structures were fixed to earth. The related input service credit was also examined on a use-based basis: rent-a-cab, railway track maintenance, housekeeping, horticulture, accommodation, erection and commissioning, insurance and PF reimbursement services were allowed, while only the specifically conceded ineligible portion after 01.04.2011 was excluded. Credit on construction of a compound wall was likewise treated as allowable for the relevant period, leaving only limited disallowance.

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Issues: (i) Whether CENVAT credit on MS items such as angles, channels, plates and sheets used for fabrication of machinery and equipment was admissible when the department treated the resulting structures as immovable property; (ii) Whether CENVAT credit on the disputed input services, including rent-a-cab, railway track maintenance, housekeeping, construction of compound wall, horticulture, accommodation, erection and commissioning, insurance and PF reimbursement services, was admissible.

Issue (i): Whether CENVAT credit on MS items such as angles, channels, plates and sheets used for fabrication of machinery and equipment was admissible when the department treated the resulting structures as immovable property.

Analysis: The disputed iron and steel items were used in fabrication of operational equipment and plant structures. Credit was taken under the capital goods head, but the substantive question was whether the material was eligible as inputs. The finding that the fabricated structures were fixed to earth and therefore immovable did not defeat credit where the materials were used in the manufacture or fabrication of eligible plant and equipment. The prior decisions relied upon by the appellant supported allowance of credit on such materials when used for fabrication of capital goods or plant components.

Conclusion: The disallowance of credit on MS items was not justified and the credit of Rs. 37,14,674/- was held admissible.

Issue (ii): Whether CENVAT credit on the disputed input services, including rent-a-cab, railway track maintenance, housekeeping, construction of compound wall, horticulture, accommodation, erection and commissioning, insurance and PF reimbursement services, was admissible.

Analysis: The services were examined with reference to their use in relation to the factory and manufacturing activity. Credit was allowed for rent-a-cab services except the portion incurred after 01.04.2011, for railway track maintenance, housekeeping, horticulture, accommodation, erection and commissioning, insurance and PF reimbursement services. Credit on construction of compound wall services was also held admissible for the relevant period, while the post-01.04.2011 portion specifically identified by the appellant was excluded.

Conclusion: The input service credit was substantially admissible, with only the admitted ineligible portions excluded, and credit of Rs. 9,13,541/- was held allowable.

Final Conclusion: The appeal succeeded in substantial part, the demand on MS items and most input services was set aside, and only the conceded ineligible credit was left out of relief.

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