Cenvat credit on materials for storage tanks allowed, as tanks used in manufacturing qualify as capital goods despite immovable character.

Storage tanks used in the manufacturing process qualify as capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004, and goods used to fabricate such tanks are eligible as inputs under Rule 2(k) when the tanks are further used in the factory. The fact that the tanks are immovable does not take them outside the capital goods definition. On that basis, iron and steel items used in fabricating the storage tanks are treated as goods used in relation to manufacture, making cenvat credit admissible and the disallowance unsustainable.

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Issues: Whether iron and steel items used for fabrication of storage tanks employed in the manufacturing process were eligible for cenvat credit as inputs and whether the tanks could be treated as capital goods notwithstanding their alleged immovable character.

Analysis: Rule 2(a) of the Cenvat Credit Rules, 2004 includes storage tanks within the definition of capital goods. The definition of input under Rule 2(k) also extends to goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. The tanks in question were used in processing the goods at an intermediate stage, and the fact that they were immovable did not take them outside the definition of capital goods. Consequently, iron and steel items used for fabrication of such tanks were goods used in relation to manufacture and were covered by the input definition.

Conclusion: The denial of cenvat credit was unsustainable and the appellant was entitled to credit on the disputed iron and steel items.

Final Conclusion: The credit availed on materials used to fabricate the storage tanks was held to be admissible, and the impugned disallowance was set aside.

Ratio Decidendi: Storage tanks used in the manufacturing process qualify as capital goods, and goods used to fabricate such capital goods are eligible as inputs under the Cenvat Credit Rules, even if the tanks are immovable.

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