Cenvat credit on steel items depends on actual factory use in fabricating capital goods, not their structural character.

CESTAT New Delhi held that Cenvat credit on steel items and other disputed goods could not be denied where credible evidence showed actual use in fabrication or manufacture of capital goods and their components within the factory. A Chartered Engineer's certificate supported that use, and the lower authority failed to consider it properly. Applying the user test recognised by the Supreme Court for similar M.S. items, the Tribunal treated eligibility as dependent on actual functional use rather than the mere character of the goods as structural items. Credit was therefore admissible, the denial was unsustainable, and the appeal succeeded.

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Issues: Whether Cenvat credit was admissible on steel items and other disputed goods used for fabrication or manufacture of capital goods and their components within the factory.

Analysis: The disputed goods were claimed to have been used in the fabrication and manufacture of capital goods and their components installed in the factory. A Chartered Engineer's certificate describing such use had been produced, but its contents were not properly considered by the lower authority. The Tribunal applied the principle that the eligibility of credit on steel structural items depends on their actual use in relation to fabrication of capital goods and components, following the user test recognised by the Supreme Court in the context of similar M.S. items.

Conclusion: The disputed goods qualified for Cenvat credit and the denial of credit was unsustainable, in favour of the assessee.

Final Conclusion: The appeal succeeded and the order denying Cenvat credit was set aside.

Ratio Decidendi: Where steel items are shown by credible evidence to have been used in fabrication or manufacture of capital goods or their components within the factory, Cenvat credit cannot be denied merely on the ground that they are structural items, and the user test governs eligibility.

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