Cenvat credit on structural items used in machinery support may be available when they have direct functional nexus with manufacture.

Steel plates, channels, angles and similar structural items used in fabrication, fitting, ducting, casing or support of machinery for clinker manufacture may qualify as capital goods for Cenvat credit where they have a direct functional nexus with the production machinery. Items are not excluded merely because they are structural in nature if they help the machinery function effectively in the manufacturing process. On that basis, such goods used in connection with the kiln system were treated as eligible for credit.

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Issues: Whether the assessee was entitled to avail Cenvat credit on Wear Plate, HRSS Plate, MS Plate, Angles, Channels and similar items used in connection with machinery for manufacture of clinker, and whether such items could be treated as capital goods.

Analysis: The credit dispute turned on whether the impugned structural items had a sufficient nexus with the manufacturing machinery. The prior Supreme Court rulings relied upon held that steel plates, channels and similar items used for fabrication or installation of machinery components, where they enable the machinery to function effectively in production, are not to be excluded merely because they are structural in nature. Applying that principle, the items used for connecting, fitting, ducting, casing and related machinery support in the kiln system were treated as falling within the ambit of capital goods for credit purposes.

Conclusion: The assessee was entitled to Cenvat credit on the impugned items as capital goods.

Final Conclusion: The appeal failed and the Tribunal's order allowing credit was sustained.

Ratio Decidendi: Goods used in the fabrication, fitting or support of machinery, where they have a direct functional nexus with manufacture, may qualify as capital goods for credit entitlement even if they are structural items.

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