Cenvat credit on steel used for machinery foundations allowed where items were integrally linked to production equipment.

Steel items used to lay the foundation and provide support for machinery installed for manufacture were held eligible for Cenvat credit because they were integrally linked to the capital goods and not used for constructing the factory building. The exclusion of goods used for foundations and supporting structures from the definition of inputs took effect only from 01.07.2012, and the disputed period was earlier. On that basis, denial of credit was unsustainable and credit on the impugned items was admissible, with consequential relief granted.

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Issues: Whether steel items such as rebar coils, TMT bars, TMT cables and MS rebars used for laying the foundation for machinery and supporting its installation were eligible for Cenvat credit as capital goods or inputs.

Analysis: The items were used in relation to the foundation on which the machinery was installed and were therefore closely linked with the specified capital goods used for production. The settled view relied upon in the order recognises credit on steel and cement when they are integrally connected with the machinery and are not used for construction of the factory building. The exclusion from the definition of inputs for goods used for foundations and supporting structures was introduced only from 01.07.2012, whereas the disputed period was prior to that date.

Conclusion: The denial of Cenvat credit was not sustainable and the credit on the impugned items was admissible.

Final Conclusion: The appeal was allowed and the assessee obtained consequential relief.

Ratio Decidendi: Goods used integrally for laying the foundation or support of machinery installed for manufacture can qualify for Cenvat credit when they are directly linked to the capital goods and the disputed period is prior to the later exclusion of such items from inputs.

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