Cenvat credit on construction materials for storage tanks and pipelines was allowed as integral to output service infrastructure.

Cenvat credit was treated as admissible on cement, TMT bars and steel tubes used to construct storage tanks, reinforcement structures and pipelines for storage and warehousing services. The rules were read to cover capital goods such as storage tanks, and inputs used in relation to capital goods or for providing output service. Because the disputed materials were integral to the appellant's service infrastructure for transfer and storage of liquid cargo, credit could not be denied merely on the ground that the appellant was not a manufacturer. Denial of credit was therefore unsustainable under the Cenvat Credit Rules, 2004.

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Issues: Whether Cenvat credit was admissible on cement, TMT bars and steel tubes used for construction of storage tanks, reinforcement works and pipelines for providing storage and warehousing services.

Analysis: The definition of capital goods under the Cenvat Credit Rules, 2004 includes storage tanks and goods used for providing output service. The definition of input also covers goods used in the manufacture of capital goods which are further used in the factory of the manufacturer, and goods used for providing output service. The disputed items were used for construction of storage tanks and pipelines for transfer of liquid cargo, which were integral to the appellant's output service. In these circumstances, the credit could not be denied merely because the appellant was not a manufacturer, since the rules permitted credit for inputs used in relation to capital goods employed for output services.

Conclusion: Cenvat credit on the disputed items was held admissible and the denial of credit was unsustainable.

Ratio Decidendi: Where goods are used in the construction of capital goods that are themselves used for providing output service, credit is allowable under the Cenvat Credit Rules, 2004.

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