Cenvat credit on structural items used to erect an integral paint plant was held admissible for manufacturing use.

Cenvat credit on MS sheets, angles and similar structural items used to fabricate and install a paint plant within the factory was held admissible because the plant formed an integral part of the manufacturing process. Authorities dealing with the earlier MODVAT regime and a retrospective reading of the capital goods definition were found inapplicable on these facts. Goods used in erecting machinery or plant essential to manufacture qualified for credit, so the denial of credit was unsustainable and the assessee succeeded.

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Issues: Whether Cenvat credit on MS sheets, angles and other structural items used for fabrication and installation of a paint plant within the factory premises was admissible as capital goods under the Cenvat Credit Rules, 2004.

Analysis: The credit was denied on the basis that the items were structural materials and that reliance was placed on decisions dealing with the erstwhile MODVAT regime and on a later view treating the amendment to the definition of capital goods as retrospective. Those authorities were found inapplicable to the facts of the case. The paint plant was established as an integral part of the manufacturing process, and the structural items were used for its fabrication and installation. Following the principle that goods used in the erection of machinery or plant forming an essential part of manufacture are eligible for credit, the denial of credit was not sustainable.

Conclusion: Cenvat credit on the MS items was admissible and the disallowance was set aside in favour of the assessee.

Ratio Decidendi: Structural items used for fabrication and erection of an integral plant or machinery component of the manufacturing process are eligible for Cenvat credit where they form part of the capital goods used in manufacture.

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