Cenvat credit on fabrication inputs was upheld for storage tanks used within the factory under the capital goods test.

Cenvat credit was held admissible on MS plates, MS angles, MS channels, MS beams and welding electrodes used to fabricate storage tanks within the factory. Explanation 2 to Rule 2(k) permits credit on goods used in the manufacture of capital goods that are further used in the factory, and that test was satisfied here because the tanks supported the manufacturing activity. Credit could not be denied merely because the fabricated tanks were described as immovable property or argued to be non-excisable. The denial of Cenvat credit was therefore unsustainable.

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Issues: Whether Cenvat credit was admissible on MS plates, MS angles, MS channels, MS beams and welding electrodes used for fabrication of storage tanks within the factory.

Analysis: The inputs were used in the manufacture of storage tanks situated in the factory premises and those tanks were further used in the manufacturing activity. Explanation 2 to Rule 2(k) of the Cenvat Credit Rules permits credit on goods used in the manufacture of capital goods which are further used in the factory. The credit could not be denied merely because the fabricated tanks were treated as immovable property or were argued to be non-excisable, since the relevant test was the use of the inputs in the manufacture of capital goods for use in the factory.

Conclusion: The credit was admissible and the denial of Cenvat credit was unsustainable.

Final Conclusion: The order denying credit was set aside and the assessee succeeded on the substantive issue of admissibility of Cenvat credit on the disputed inputs.

Ratio Decidendi: Credit is allowable on goods used to manufacture capital goods when those capital goods are used within the factory, and such credit cannot be denied merely because the resulting structure is treated as immovable property.

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