Credit on fabrication materials for plant installation upheld where structurals satisfy the user test and precedent is distinguishable.

Steel plates, M.S. angles, M.S. channels and H.R. plates used to fabricate and erect supporting structurals for plant and machinery can qualify for credit where the user test is satisfied. The Court treated its earlier Division Bench view, read with Rajasthan Spinning & Weaving Mills, as governing and distinguished the Revenue's contrary precedent because that case concerned complete machinery purchased by the assessee, not fabrication materials. The Tribunal's reliance on the later notification and the adverse precedent was rejected, and the credit claim was upheld.

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Issues: Whether steel plates, M.S. angles, M.S. channels and H.R. plates used in the erection and fabrication of plant and machinery were eligible for credit as capital goods or inputs, and whether the Tribunal was right in denying the credit by applying the later notification and contrary precedent.

Analysis: The Court followed its earlier decisions holding that structurals used for fabrication and erection of machinery satisfy the user test and fall within the ambit of capital goods for credit purposes. The reliance placed by the Revenue on a contrary Supreme Court decision was treated as distinguishable on facts, as that case turned on complete machinery purchased by the assessee and not on materials used to fabricate supporting structurals. The Court also proceeded on the basis that the earlier Division Bench view, applying the ratio of the Supreme Court decision in Rajasthan Spinning & Weaving Mills Ltd., governed the controversy. The Tribunal's contrary view was therefore not accepted.

Conclusion: The assessee was entitled to the credit and the Tribunal's order was set aside.

Ratio Decidendi: Materials used in the fabrication and erection of structurals essential for installation and functioning of plant and machinery can qualify for credit where the user test is satisfied, and a factually distinguishable precedent denying credit on complete machinery does not govern such cases.

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