Cenvat credit on structural steel used for plant support structures is admissible where it has a functional nexus with capital goods.

Cenvat credit on structural steel items such as angles, channels, beams and plates used in fabricating support structures for plant and machinery was treated as admissible where the items had a functional nexus with capital goods. The relevant inquiry was not whether the plant or machinery was immovable, but whether the steel items were used in relation to capital goods and formed part of their fabrication or support arrangement within the manufacturing setup. Applying the user test and prior decisions on structurals used for erection or fabrication of plant and machinery, the disallowance was found unsustainable.

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Issues: Whether cenvat credit was admissible on structural steel items such as angles, channels, beams and plates used in the fabrication of support structures for plant and machinery treated as capital goods.

Analysis: The relevant question was not whether the plant or machinery was immovable, but whether the steel items, on the facts of use, were employed in relation to capital goods and formed part of their fabrication or support arrangement within the manufacturing setup. Applying the user test, structural items used to make machinery effectively operational and to support integrated plant and equipment were treated as having a functional nexus with capital goods. The reasoning was supported by prior decisions holding that such structurals used for erection or fabrication of plant and machinery are eligible for credit.

Conclusion: Cenvat credit on the structural steel items was admissible and the disallowance was unsustainable.

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