CENVAT credit on construction materials used to erect plant and machinery is admissible when integrally connected with installation.

CENVAT credit under the 2004 regime was admissible on capital goods and construction materials such as cement, MS plates, angles, channels and HR sheets used for erection of a dry process cement plant and machinery. Applying the definition of capital goods under Rule 2(a)(A) and the continued Modvat-based interpretation, the HC treated structural items integrally connected with fabrication of supports and installation of machinery as eligible, rather than denying credit merely because they were used in construction. The later amendment and notification excluding certain construction materials did not alter the result on these facts, so the Revenue's challenge failed.

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Issues: Whether CENVAT credit was admissible on capital goods and construction materials such as cement, MS plates, angles, channels and HR sheets used in the construction of a dry process cement manufacturing plant and for erection of machinery.

Analysis: The dispute was governed by the CENVAT Credit Rules, 2004, particularly the definition of capital goods under Rule 2(a)(A), read in the light of the Supreme Court's interpretation that the Cenvat regime substantially continued the earlier Modvat principles. The Court noted that in the assessee's own matters and in analogous cases, credit had been allowed where structural steel items were used for fabrication of supports and for erection of machinery, because such items were integrally connected with the plant and machinery and were not denied merely on the ground of being used in construction. The Court also accepted that the later amendment and notification excluding certain construction materials did not assist the Revenue in the facts of the case.

Conclusion: CENVAT credit on the disputed items was admissible, and the Revenue's challenge failed.

Ratio Decidendi: Materials and structural items used integrally for erection of plant and machinery in a manufacturing setup can qualify for CENVAT credit under the 2004 regime when the governing interpretation treats such items as part of the eligible capital goods framework.

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