Cenvat credit on railway track materials and works contract services was admissible for factory material-handling infrastructure.

Cenvat credit on railway track materials and works contract services used for laying railway lines within and around factory premises was held admissible. The railway siding and track were treated as an integral part of the factory's material-handling system because they facilitated inward movement of inputs and outward movement of finished goods. The track outside the factory was regarded as an extension of the internal track, satisfying the requirement that the goods be used in the factory. Railway track was treated as capital goods in this context, and the related works contract services were not covered by the exclusion in Rule 2(l) of the Cenvat Credit Rules, 2004.

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Issues: Whether Cenvat credit was admissible on railway track materials and related works contract services used for laying railway lines within and around the factory premises.

Analysis: The railway siding and track formed an integral part of the factory's material handling arrangement, as they facilitated movement of inputs into the factory and finished goods out of it. The portion of the railway track outside the factory was treated as an extension of the portion inside the factory, satisfying the requirement that the goods be used in the factory. In view of the settled position that railway track qualifies as capital goods in this context, and that works contract services for laying railway lines are not covered by the exclusion in Rule 2(l) of the Cenvat Credit Rules, 2004, the credit could not be denied.

Conclusion: The Cenvat credit on railway track materials and works contract services was admissible, and the appeal succeeded.

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