Cenvat Credit on Structural Steel for Capital Goods Support Structures Allowed Under the User Test

Cenvat credit is admissible on structural steel items such as M.S. angles, channels, plates, joists, beams and welding electrodes when they are used to fabricate support structures for capital goods inside the factory. The analysis applies the user test and treats credit eligibility as dependent on end use rather than tariff description; such items may qualify as components, spares or accessories of capital goods if they support their functioning in manufacture. The contrary view that attachment to earth by itself defeats credit was rejected in light of settled precedent, and the disallowance was set aside.

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Issues: Whether Cenvat credit is admissible on structural steel items such as M.S. angles, channels, plates, joists, beams and welding electrodes used for fabrication of support structures for capital goods installed within the factory.

Analysis: The structural items were used in erecting and supporting capital goods employed in the manufacture of sponge iron. Credit eligibility depended on the end use of the goods rather than their tariff description. Applying the user test recognised in earlier decisions, items used in fabrication of support structures for capital goods fall within the ambit of components, spares or accessories of capital goods. The contrary view that such items became ineligible merely because the structures were attached to earth was not accepted in view of the settled precedent treating such use as sufficient for credit where the goods serve the functioning of capital goods inside the factory.

Conclusion: Cenvat credit on the structural steel items was held admissible and the denial of credit was rejected.

Final Conclusion: The impugned order disallowing credit was set aside and the appeal was allowed in favour of the assessee.

Ratio Decidendi: Structural steel items used in the fabrication of support structures for capital goods qualify for Cenvat credit when their end use satisfies the user test and they function as parts, components, spares or accessories of the capital goods within the factory.

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