Cenvat credit on materials for storage tanks and pollution control equipment allowed where they formed factory capital goods.

Cenvat credit on steel, cement and allied materials used to construct iron/coke storage tanks, gas storage tanks and pollution control equipment was held admissible because the items were used to make capital goods installed within the factory, not for ordinary civil construction. The materials therefore qualified as inputs used in the manufacture of capital goods, and the fixed or immovable nature of the resulting structure did not by itself defeat credit where the underlying equipment fell within the capital goods category. In the absence of contrary evidence, denial of credit and the consequential penalty were unsustainable; the impugned order was set aside and relief granted to the assessee.

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Issues: Whether Cenvat credit was admissible on steel, cement and allied items used in the construction of storage tanks and pollution control equipment.

Analysis: The factual finding recorded was that the disputed items were used for constructing iron/coke storage tanks, gas storage tanks and pollution control equipment, and not for ordinary civil construction. Such storage tanks and pollution control equipment fall within the definition of capital goods, and the materials used in their construction qualify as inputs used in the manufacture of capital goods for use within the factory. In the absence of any contrary evidence from the Revenue, and in view of the settled legal position that such inputs are eligible for credit, denial of credit and consequential penalty could not be sustained.

Conclusion: The credit was admissible and the denial thereof was incorrect; the issue is decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Materials used in constructing capital goods installed and used within the factory qualify for Cenvat credit as inputs, and such credit cannot be denied merely because the resulting structure is fixed or immovable when the underlying capital goods category is otherwise covered.

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