Cenvat credit on cement and structural items allowed where used for clinker silos and support structures in manufacturing.

Cenvat credit on cement and structural items was treated as admissible where the goods were used to construct clinker silos and support structures for capital goods in the manufacturing unit. Applying the user test and the settled nexus principle, the article notes that materials used for fabrication of essential support structures for machinery, or for facilities necessary to establish the manufacturing unit, are sufficiently connected with manufacture. Cement used for clinker silos was characterised as a material for an essential manufacturing installation rather than civil construction, and the structural items were treated as parts of support structures for capital goods. Credit was therefore allowed.

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Issues: Whether Cenvat credit was admissible on cement and structural items used for construction of clinker silos and support structures for capital goods in the manufacturing unit.

Analysis: The credit claim was examined in the light of the user test and the settled principle that goods used for fabrication of support structures for machinery, or for construction of facilities absolutely necessary for establishing the manufacturing unit, are treated as having a sufficient nexus with manufacture. Cement used for clinker silos was found to be used as a raw material for construction of an essential manufacturing installation and not for civil construction. The structural items were also treated as used for fabrication of support structures for capital goods, which fall within the ambit of capital goods for credit purposes.

Conclusion: Cenvat credit on both cement and structural items was held to be admissible, and the assessee's challenge succeeded.

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