Cenvat credit on furnace oil used to generate steam within factory premises was held admissible

Under the broad definition of "factory" in section 2(e) of the Central Excise Act, premises where manufacturing activity occurs within the precincts qualify for Cenvat purposes. Furnace oil stored and used inside the factory for generating steam was treated as having been used within the factory premises, and the assessee was found to have complied with Rule 57AB of the CENVAT Credit Rules. Credit on the furnace oil was therefore admissible, and the denial of credit and associated penalty were set aside as unjustified.

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Issues: Whether Cenvat credit was admissible on furnace oil stored and used within the factory precincts for manufacture of steam, and whether denial of credit and penalty were justified.

Analysis: The definition of "factory" in Section 2(e) of the Central Excise Act, 1944 was treated as broad enough to include premises where manufacturing activities are carried on in any part of the premises or precincts thereof. On the facts, the storage and use of furnace oil for generation of steam were held to have taken place within the factory premises. The appellant was found to have complied with Rule 57AB of the CENVAT Credit Rules, and the refusal of credit was held unjustified.

Conclusion: Cenvat credit was admissible, and the disallowance of credit and imposition of penalty were set aside in favour of the assessee.

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