High court permits input tax credit on construction materials utilized in cement facility setup

The Madras High Court has upheld the eligibility of CENVAT credit for cement and steel items used in constructing a dry-process cement manufacturing facility. The judicial pronouncement resolves disputes concerning whether structural inputs qualify as capital goods or inputs under the relevant excise regulations. The court evaluated the functional utility of these materials in establishing the integrated manufacturing plant. Historically, revenue authorities frequently contested credit claims on structural items like cement and steel, arguing they formed immovable property rather than operational inputs.

The judicial framework, however, often evaluates whether such items are essential for erecting machinery and housing production units. Allowing credit acknowledges the integrated nature of modern industrial infrastructure where structural foundations are integral to the manufacturing apparatus. Tax practitioners handling manufacturing clients must audit past credit reversals on factory construction materials to evaluate refund claims.

Companies should compile documentation linking steel and cement usage directly to plant and machinery foundations. Bottom line: manufacturers can reclaim disputed credits on factory infrastructure, improving liquidity and compliance posture.