Cenvat credit on steel items for fabrication of capital goods in a sugar factory was upheld as eligible input use.

Steel items used to fabricate and install components and accessories of capital goods in a sugar factory were treated as eligible Cenvat credit inputs where they formed part of machinery such as cane carriers, juice clarifiers, evaporators, pan stations, molasses tanks and boiler-related structures used in manufacture. The Revenue's reliance on cases involving embedded supporting structures and immovable assets was distinguished on facts, and circulars treating structural components used as part of boiler systems as boiler parts supported the claim. The items were therefore not characterised as mere civil or immovable structures, and credit was allowed without reversal.

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Issues: Whether the appellant was entitled to Cenvat credit on steel items used for fabrication and installation of components and accessories of capital goods in the sugar factory.

Analysis: The items in question were used for fabrication of machinery and allied components such as cane carrier, juice clarifier, evaporator, pan station, molasses tanks and boiler-related structures, which formed part of the capital goods used in manufacture of sugar and molasses. The cases relied on by the Revenue were distinguished on facts, as they concerned supporting structures embedded to earth and immovable assets. The circulars clarifying that structural components used essentially as part of boiler systems are to be treated as parts of the boiler also supported the appellant's claim. Accordingly, the items were treated as inputs used for fabrication of capital goods and not as mere civil or immovable structures.

Conclusion: The appellant was entitled to avail Cenvat credit on the items in question and was not required to reverse the credit.

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