Cenvat credit on steel items used to fabricate a furnace chimney was allowed as capital goods.

MS plates, angles, channels, rounds, screws and similar iron and steel items used in fabricating a chimney for a furnace were treated as eligible for Cenvat credit as capital goods under Rule 2(b) of the Cenvat Credit Rules, 2002. The chimney was regarded as an essential part of the furnace and necessary for its operation, so the credit claim was allowed. The contrary contention that the items were used only for repair of the chimney was rejected, the evidence supporting fabrication for plant operations being accepted along with precedents on steel items used in construction or maintenance of plant and machinery.

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Issues: Whether MS plates, MS angles, channels, rounds, screws and similar iron and steel items used in fabrication of chimney and furnace were eligible for Cenvat credit as capital goods.

Analysis: The items were used in building the chimney, which was an essential part of the furnace and necessary for its operation. The definition of capital goods under Rule 2(b) of the Cenvat Credit Rules, 2002 was applied in light of the view that steel items used in fabrication of chimney for plant operations can qualify for credit. The contrary plea that the goods were only used for repair of the chimney was not accepted, particularly in view of the evidence considered by the Commissioner (Appeals) and the supporting precedents on eligibility of steel items used in fabrication or maintenance of plant and machinery.

Conclusion: The credit was held admissible and the Revenue's challenge failed.

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