Cenvat credit on welding electrodes and structural steel for capital goods support structures was upheld as admissible.

Cenvat credit was discussed in relation to welding electrodes used in the factory and structural steel items such as MS angles, channels, CTD bar and TMT bar used to fabricate support structures for capital goods. Welding electrodes were treated as eligible inputs when used in manufacture, repair or maintenance, and credit on them was recognised as admissible. Structural items used for support structures of kiln, conveyor system and furnace were also treated as eligible because they were integral to the functioning of the capital goods and satisfied the user test. The later exclusion of structural items used for foundation or support was treated as prospective, so the disallowance, interest and penalty could not stand.

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Issues: (i) whether Cenvat credit was admissible on welding electrodes used in the factory; and (ii) whether Cenvat credit was admissible on structural steel items such as MS angles, channels, CTD bar and TMT bar used in fabrication of support structures for capital goods.

Issue (i): Entitlement of Cenvat Credit on welding electrodes

Analysis: Welding electrodes were treated as eligible inputs where they were used in relation to manufacture, repair or maintenance within the credit scheme. The contrary view that they could not qualify as capital goods did not displace the consistent line of decisions recognising admissibility of credit on such items as inputs.

Conclusion: Cenvat credit on welding electrodes was held admissible in favour of the assessee.

Issue (ii): Availability of Cenvat Credit on various structural items, such as, MS Angles, Channels, CTD bar, TMT bar etc. which have been used in support structure of the capital goods

Analysis: The structural items were used to fabricate support structures for capital goods like kiln, conveyor system and furnace. Applying the user test, the support structures were treated as integral to the functioning of the machines and therefore within the scope of components, spares or accessories of capital goods. The 2009 amendment excluding structural items used for foundation or support was treated as prospective and not as a clarification taking away prior entitlement.

Conclusion: Cenvat credit on the structural items used for support structures of capital goods was held admissible in favour of the assessee.

Final Conclusion: The impugned disallowance, interest demand and penalty could not be sustained, and the appeal succeeded on merits.

Ratio Decidendi: Where structural items are used to fabricate support structures that are integral to capital goods and satisfy the user test, they fall within the Cenvat credit scheme as components or accessories of capital goods, and the later exclusionary amendment applies only prospectively.

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