CENVAT credit allowed for captive mines and beneficiation plant where integrated use established nexus with final dutiable manufacture.

In a captive, integrated manufacturing arrangement, CENVAT credit is allowable where input services or capital goods used in separately registered units outside the factory have an inextricable nexus with manufacture of the final dutiable product. Services used for mining, transport and beneficiation of ore, as well as capital goods installed in the captive beneficiation plant, were treated as part of the same manufacturing stream; credit was therefore admissible in the hands of the factory.

---

---

Issues: (i) Whether CENVAT credit on input services availed at the captive mines was admissible in the hands of the factory; (ii) Whether CENVAT credit on capital goods installed at the captive beneficiation plant was admissible in the hands of the factory.

Issue (i): Whether CENVAT credit on input services availed at the captive mines was admissible in the hands of the factory.

Analysis: The mines, beneficiation plant, and factory formed one captive and integrated arrangement for manufacture of the final dutiable product. The input services such as mining and cargo handling were used for excavation, transportation, and beneficiation of ore that was ultimately consumed in the factory. The fact that the units were separately registered did not break the nexus where the services were used in relation to manufacture of the final product and duty was discharged on clearance.

Conclusion: CENVAT credit on the input services was admissible in the hands of the factory.

Issue (ii): Whether CENVAT credit on capital goods installed at the captive beneficiation plant was admissible in the hands of the factory.

Analysis: The capital goods were installed in a captive unit that functioned as part of the same manufacturing stream and were used for producing beneficiated ore for the factory. Credit cannot be denied merely because the machinery was located outside the factory premises or because the beneficiation plant had separate registration, where the plant was integral to the manufacture of the final excisable product and the goods were duty paid.

Conclusion: CENVAT credit on the capital goods was admissible in the hands of the factory.

Final Conclusion: Denial of CENVAT credit on both input services and capital goods was unsustainable, and the appeal succeeded with consequential relief.

Ratio Decidendi: In a captive, integrated manufacturing arrangement, CENVAT credit is allowable where the input services or capital goods, though used in different registered units or outside the factory premises, have an inextricable nexus with the manufacture of the final dutiable product.

---