Cenvat credit on fabrication inputs allowed where steel items were used as components of capital goods.

Cenvat credit was admissible on HR plates, sections and similar steel items used to fabricate storage tanks and other capital goods because eligibility depended on their use as components, spares or accessories in the factory and on satisfaction of the statutory definition under the Cenvat Credit Rules. Classification under Chapter 72 did not by itself defeat credit where the goods were employed in manufacture or fabrication of integral parts of capital goods. Relying on earlier authority, the court held that such items qualify for credit when used for fabrication of capital goods, and the substantial question of law was answered in favour of the assessee.

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Issues: Whether Cenvat credit was admissible on HR plates, sections and similar items used in the fabrication of storage tanks and other capital goods, despite their classification under Chapter 72.

Analysis: Eligibility for credit depended on whether the goods fell within the definition of capital goods or constituted components, spares or accessories used in the factory. The goods were not used as independent capital goods merely because they were later shaped and fitted for fabrication. The controlling principle applied was that credit is available when the items are used in the manufacture or fabrication of capital goods and satisfy the statutory definition under the Cenvat Credit Rules. The prior decisions relied upon supported allowance of credit on steel plates, channels and similar items when used for fabrication of integral parts or accessories of capital goods.

Conclusion: Cenvat credit was held admissible, and the substantial question of law was answered in favour of the assessee and against the Department.

Ratio Decidendi: Goods used as components, spares or accessories in the fabrication of capital goods qualify for Cenvat credit if they satisfy the statutory definition, even if they are classifiable under a chapter not specifically listed as capital goods.

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