Cenvat credit for inputs used in pollution control equipment parts was upheld under the capital goods and inputs rules.

Cenvat credit was admissible on inputs used to fabricate parts of pollution control equipment and allied capital goods installed in the factory. Rule 2(a) of the Cenvat Credit Rules, 2004 treated pollution control equipment and their components, spares and accessories as capital goods, while Rule 2(k) recognised inputs used in the manufacture of capital goods used in the factory. The Board circular also supported credit availability, and the exclusions did not apply on these facts. The credit was therefore upheld and the Revenue challenge failed.

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Issues: Whether Cenvat credit on inputs used in the manufacture of parts of pollution control equipment and allied capital goods was admissible.

Analysis: The inputs were found to have been used in fabrication of capital goods such as bag filter, crusher house, burner pipe, duct line, heat exchanger and pollution control system parts, which were installed with nuts and bolts on base plates and could be dismantled. Rule 2(a) of the Cenvat Credit Rules, 2004 treats specified goods and pollution control equipment, together with their components, spares and accessories, as capital goods. Rule 2(k) further recognises inputs used in the manufacture of capital goods which are themselves used in the factory, and the Board circular also clarifies availability of credit in such cases, subject to exclusions not applicable here.

Conclusion: The credit was held admissible and the Revenue's challenge failed.

Final Conclusion: The order allowing credit was upheld, and the Revenue appeal was dismissed.

Ratio Decidendi: Inputs used to manufacture movable parts of capital goods, including pollution control equipment used in the factory, qualify for Cenvat credit under the relevant rules.

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