Cenvat credit on structural steel for machinery support structures upheld as admissible when linked to plant functioning.

Cenvat credit on steel items such as M.S. bars, plates, angles, beams and channels was found admissible where they were used for repair, maintenance, modification and fabrication of support structures for plant and machinery inside the factory. The analysis applied the user test and treated structural steel used to fabricate capital goods, or their parts and accessories, as integrally connected with the functioning of the plant. It further noted that mere embedding in earth or use as structural material does not by itself defeat credit when the items are used in fabrication of capital goods or accessories. The disallowance was set aside in favour of the assessee.

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Issues: Whether Cenvat credit was admissible on steel items such as M.S. bars, plates, angles, beams and channels used for repair, maintenance, modification and fabrication of support structures for plant and machinery.

Analysis: The goods were examined in the context of the user test applied to determine whether steel items used in fabrication of capital goods, or their parts and accessories, qualify for credit. The reasoning accepted that structural steel used to fabricate support structures for machinery inside the factory is integrally connected with the functioning of the plant and falls within the ambit of capital goods. The cited authorities were treated as supporting the view that mere embedding in earth or use as structural material does not by itself deny credit where the items are used in fabrication of capital goods or their accessories.

Conclusion: Cenvat credit on the disputed steel items was held admissible and the disallowance was set aside in favour of the assessee.

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