CENVAT credit on mandatory fire extinguishers allowed where factory safety equipment qualified as capital goods

CENVAT credit on fire extinguishers used in factory premises was held admissible because they were a mandatory requirement for an operating manufacturing unit under the Factories Act and were classified under Chapter 84 in the supplier's invoice, bringing them within capital goods under the Cenvat Credit Rules, 2004. Credit could not be denied merely because the goods did not have a direct or indirect role in manufacture. The order disallowing credit was set aside and relief followed.

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Issues: Whether CENVAT credit was admissible on fire extinguishers used in the factory premises.

Analysis: Fire extinguishers were found to be a mandatory requirement under Section 38 of the Factories Act, 1948 for an operating manufacturing unit. The goods were also shown in the supplier's invoice as classifiable under Chapter 84, which brought them within the definition of capital goods under Rule 2 of the Cenvat Credit Rules, 2004. In these circumstances, credit could not be denied merely on the ground that the fire extinguishers did not have a direct or indirect role in manufacture.

Conclusion: CENVAT credit on the fire extinguishers was admissible and the denial was unsustainable.

Final Conclusion: The order denying credit was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Goods that are statutorily required for factory operation and are classifiable as capital goods cannot be denied CENVAT credit merely because they do not participate directly or indirectly in manufacture.

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