CENVAT credit on steel used for in-factory storage racks upheld as integral to manufacture and material handling.

Steel items such as angles, channels, beams and nuts-bolts used to fabricate in-factory storage racks and vertical storage systems for raw materials and finished goods were held to have a sufficient nexus with manufacture. Proper storage and internal material handling were treated as integral to the manufacturing process because manufacture cannot proceed effectively without movement and storage of inputs within the factory. Following consistent Tribunal precedent, the storage system was treated as used in or in relation to manufacture, so CENVAT credit was admissible on the fabrication goods and consequential relief followed.

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Issues: Whether CENVAT credit was admissible on angles, channels, beams, nuts-bolts and similar steel items used for fabrication of storage racks and vertical storage systems for raw materials and finished goods.

Analysis: The steel items were used to fabricate storage racks within the factory for storing raw materials and finished goods. Proper storage and material handling were treated as essential to the manufacturing process, since the manufacture cannot proceed effectively without movement and storage of inputs within the factory. The storage system was therefore held to be used in or in relation to manufacture and to bear a sufficient nexus with the final product. Consistent Tribunal precedent was followed to hold that such storage systems qualify for credit.

Conclusion: CENVAT credit on the steel items used for fabrication of storage racks was admissible.

Final Conclusion: The impugned order was set aside and the appeal was allowed by granting CENVAT credit with consequential relief.

Ratio Decidendi: Goods used to fabricate an in-factory storage system that is integral to the handling and storage of inputs and finished goods have a direct nexus with manufacture and are eligible for CENVAT credit.

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