Structural steel used for machinery supports qualifies as capital goods for MODVAT credit where it is necessary for erection and functioning.

Structural steel items such as MS plates, angles, channels and HR sheets used to fabricate supporting structurals for machinery satisfied the user test under Rule 57Q because the machinery could not be erected or function without them. Following the assessee's earlier case, the HC treated these items as having the necessary nexus with plant and machinery and therefore as capital goods eligible for MODVAT credit. The Revenue's reliance on a later Supreme Court decision was rejected as factually distinguishable, and the Revenue's challenge failed.

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Issues: Whether structural steel items used in fabrication of supporting structurals for machinery were capital goods eligible for MODVAT credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The disputed items, namely MS plates, angles, channels and HR sheets, were used for fabricating structurals to support machinery such as crushers, kilns, hoppers, pre-heaters and conveyor systems. The factual finding was that without such structurals the machinery could not be erected or function. Applying the user test and following the earlier decision in the assessee's own case, the Court held that steel items used in such fabrication had the requisite nexus with the plant and machinery and could be treated as capital goods. The contrary reliance on the later Supreme Court decision was rejected as factually distinguishable.

Conclusion: The structural steel items were eligible for MODVAT credit as capital goods under Rule 57Q, and the Revenue's appeal failed.

Ratio Decidendi: Steel items used in the fabrication of structurals that are necessary for erection and functioning of machinery satisfy the user test and qualify as capital goods for MODVAT credit under Rule 57Q.

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