Cenvat credit on structural steel for manufacturing equipment upheld under the user test for integral technical structures.

Cenvat credit on iron and steel structural items used to fabricate a kiln, heat exchanger, pollution control equipment, chimney, induction furnace and similar technical structures was examined under the user test applied by the Supreme Court. Structural steel used to make equipment and structures integral to the manufacturing set-up was treated as satisfying that test, so the items fell within the scope of admissible credit as capital goods or inputs under Rule 2(a) of the Cenvat Credit Rules, 2004. The disallowance of credit was therefore held unsustainable, and the credit eligibility claim succeeded.

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Issues: Whether Cenvat credit was admissible on iron and steel structural items used in fabrication of kiln, heat exchanger, pollution control equipment, chimney, induction furnace and other technical structures forming part of the manufacturing set-up.

Analysis: The credit claim was examined in the light of the user test applied by the Supreme Court while determining whether goods used in fabrication of equipment or structures integral to manufacture can be treated as capital goods or inputs. Structural steel items used for making equipment and technical structures connected with the manufacture of the final product were held to satisfy that test. On that basis, such items were found to fall within the scope of admissible credit under Rule 2(a) of the Cenvat Credit Rules, 2004.

Conclusion: The disallowance of Cenvat credit was unsustainable and the appellant was entitled to credit.

Final Conclusion: The impugned order was set aside and the appellant succeeded on the credit eligibility issue.

Ratio Decidendi: Structural steel items used in fabrication of equipment or technical structures integral to manufacture are eligible for Cenvat credit when they satisfy the user test and function as capital goods or their components under the credit rules.

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