Expanded capital goods definition permits Modvat/Cenvat credit on inputs used to manufacture storage tanks.

Modvat/Cenvat credit was admissible on inputs used to manufacture a storage tank because the operative amendment to Rule 57AA expressly included storage tank within the definition of capital goods. As the relevant period fell after that amendment, inputs used in manufacturing capital goods further used in the factory qualified for credit under the scheme. Earlier Revenue decisions were distinguishable because they predated the insertion of storage tank into the rule. The prior denial of credit was therefore unsustainable, and the issue was decided in favour of the assessee.

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Issues: Whether Modvat/Cenvat credit was admissible on inputs used in the manufacture of a storage tank when storage tank had been specifically included within the definition of capital goods by amendment.

Analysis: Rule 57AA of the Central Excise Rules, 1944, as amended by Notification No. 6/2001-C.E. (N.T.) dated 01.03.2001, expressly included storage tank within the definition of capital goods. The relevant period fell after the amendment. The provision also recognised inputs used in the manufacture of capital goods which are further used in the factory. In these circumstances, the prior denial of credit could not stand. Earlier decisions relied on by the Revenue were distinguishable as they predated the insertion of storage tank in the rule.

Conclusion: Modvat/Cenvat credit was admissible and the denial of credit was unsustainable; the issue is decided in favour of the assessee and against the Revenue.

Ratio Decidendi: Where a storage tank is expressly brought within the definition of capital goods by an operative amendment, inputs used to manufacture it qualify for credit under the Cenvat/Modvat scheme for the relevant period.

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