Cenvat credit on structural steel for plant fabrication is allowable when used as parts or supports of capital goods.

Cenvat credit was admissible on structural steel items such as TMT bars, plates, channels and pipes used to fabricate support structures and machinery components within a cement factory. The text applies the user test and treats such goods as parts, components or accessories of capital goods where they are used for assembling and supporting plant and machinery, including kiln parts, coal mills, conveyors, tanks and silos. Credit cannot be denied merely because the resulting structure is embedded to earth or viewed as immovable, and the manufacturer need not establish excisability or marketability of the fabricated structure before credit is allowed. The later exclusion of such items from the definition of input was prospective.

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Issues: Whether cenvat credit was admissible on steel items such as TMT bars, plates, channels, pipes and similar goods used in fabrication, erection and support structures of plant and machinery employed in manufacture of cement.

Analysis: The steel items were used for assembling and supporting machinery, including kiln parts, coal mill components, conveyor systems, tanks, silos and other plant facilities. The denial of credit by treating the resulting structures as immovable and therefore non-marketable capital goods was held to be misconceived. The Cenvat Credit Rules do not require the manufacturer to establish excisability or marketability of the final structure before credit can be allowed on inputs used in fabrication of capital goods. Applying the user test, the Tribunal held that structural items used to fabricate support structures and machinery components within the factory are eligible as parts, components or accessories of capital goods. The subsequent amendment excluding such items from the definition of input was treated as prospective and not applicable to the relevant period.

Conclusion: Cenvat credit on the disputed steel items was admissible and the disallowance and penalty could not be sustained.

Ratio Decidendi: Structural steel items used in the fabrication of support structures and machinery within the factory are eligible for cenvat credit when they satisfy the user test as components or parts of capital goods, and credit cannot be denied merely because the fabricated structure is embedded to earth or treated as immovable.

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