Cenvat credit on structural steel for machine support structures remains available under the user test, with exclusion applying prospectively.

Structural steel items such as angles, channels, beams and plates used to fabricate support structures for capital goods within the factory were treated as eligible for Cenvat credit. Applying the settled user test, the Tribunal held that such items function as parts or components of the machinery when used to enable effective plant operation, and they do not lose credit eligibility merely because they are fixed to earth. The amendment to Explanation II to Rule 2(a) of the Cenvat Credit Rules, 2004 was not treated as clarificatory for the relevant period, so the exclusion operated only prospectively and the credit denial could not be sustained.

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Issues: Whether Cenvat credit was admissible on structural steel items such as angles, channels, beams, plates and similar goods used in the fabrication of support structures for capital goods inside the factory premises.

Analysis: The Tribunal applied the settled user test to hold that steel items used for fabrication of support structures for machinery and plant are to be treated as parts or components of the relevant capital goods when they are used within the manufacturer's premises for enabling effective functioning of the plant. It followed the line of authority recognising that embedded or supporting structures do not lose credit eligibility merely because they are fixed to earth, and noted that the amendment to Explanation-II to Rule 2(a) of the Cenvat Credit Rules, 2004 was not to be treated as clarificatory for the relevant period.

Conclusion: Cenvat credit on the impugned structural steel items was held admissible, and the demand denying such credit could not be sustained.

Ratio Decidendi: Structural steel items used in the fabrication of support structures for capital goods within the factory are eligible for Cenvat credit when, applying the user test, they function as components or accessories of the capital goods and the relevant exclusion operates only prospectively.

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