Capital goods credit extends to structural steel used for machinery support structures with direct functional nexus.

Structural steel items used to fabricate support structures for machinery may qualify as capital goods where the user test shows a direct functional nexus with the machines. When such items are not merely construction material but are integrally connected with the working of kilns, conveyors and related equipment, they can fall within the scope of capital goods, including components, spares and accessories. On that basis, the article states that Cenvat credit is available on the structural steel used for such fabrication.

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Issues: Whether structural steel items used in fabrication of support structures for capital goods were eligible for Cenvat credit as capital goods or components thereof.

Analysis: The dispute was governed by the user test for determining whether goods qualify as capital goods. Structural steel items were used not as mere construction material but for fabricating support structures necessary for the functioning of machines such as kilns, conveyors and related equipment. Goods so fabricated form part of the relevant machinery, and the definition of capital goods extends to components, spares and accessories. The issue was covered by the principle that items used in erection or fabrication of machinery support structures, when integrally connected with the working of the machines, are eligible for credit.

Conclusion: The structural steel items used in fabrication of support structures fell within the ambit of capital goods and the appellant was entitled to Cenvat credit.

Ratio Decidendi: Goods used in fabricating support structures integral to the functioning of machinery qualify as capital goods where the user test shows a direct functional nexus with the machinery and its components.

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