Cenvat credit on structural steel support items allowed where fabricated supports formed part of machinery and satisfied the user test.

Structural steel items used to fabricate support structures for machinery were treated as eligible capital goods for Cenvat credit because, under the user test, the fabricated supports formed part of the functioning of the machinery and operated as components, spares or accessories of the capital goods. The Tribunal reasoned that equipment such as kilns, conveyors and furnaces cannot function without suitable supports, so the disputed items assumed the character of parts of those machines. Credit was therefore allowable and the denial of Cenvat credit was unsustainable.

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Issues: Whether structural steel items used in the fabrication of support structures for machinery and other capital goods qualify as capital goods eligible for Cenvat credit under the relevant credit rules.

Analysis: The items in dispute were used after being worked upon for fabrication of support structures necessary for the functioning of capital goods such as kiln, material handling conveyor system and furnace. Applying the user test, the Tribunal held that machines of this nature cannot function in mid-air and require suitable support structures. Goods fabricated using such structural items therefore assume the character of parts of the relevant machines. As capital goods include components, spares and accessories, the disputed items fell within the ambit of capital goods for the purpose of credit.

Conclusion: The structural items were held eligible for Cenvat credit and the denial of credit was unsustainable.

Final Conclusion: The appeal succeeded and the order denying Cenvat credit was set aside in favour of the assessee.

Ratio Decidendi: Structural items used to fabricate support structures for capital goods are eligible for credit when they satisfy the user test and form part of the components, spares or accessories of the machinery.

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