CENVAT credit on structural items for storage tanks and support structures is admissible when the user test is satisfied.

Structural items such as TMT bars, cement and similar materials used to fabricate storage tanks and support structures were treated as eligible for CENVAT credit because they were functionally necessary for capital goods and satisfied the user test. The commentary also states that the extended limitation period could not be invoked where the assessee had already disclosed the credit claim in response to an audit objection, so suppression of facts was not established. On that basis, the credit claim was accepted and the demand was regarded as time-barred, with consequential relief following according to law.

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Issues: (i) Whether CENVAT credit was admissible on TMT bars, cement and other structural items used in the fabrication of storage tanks and support structures; (ii) Whether the demand was barred by limitation.

Issue (i): Whether CENVAT credit was admissible on TMT bars, cement and other structural items used in the fabrication of storage tanks and support structures.

Analysis: The credit dispute turned on whether the goods were used for fabricating storage tanks and supporting structures forming part of the capital goods. The reasoning accepted that structural items used to fabricate support structures are to be tested on user and functional necessity. Applying the user test and the settled view that components, spares and accessories of capital goods fall within the credit scheme, the items used for such fabrication were treated as eligible for credit. The view was reinforced by the later judicial treatment of similar structural steel and cement used in construction related to capital goods and storage facilities.

Conclusion: The issue was decided in favour of the assessee and CENVAT credit was held admissible.

Issue (ii): Whether the demand was barred by limitation.

Analysis: The appellant had responded to an audit objection on the same issue in 2007, disclosing its claim to credit on the disputed items. In these circumstances, the record did not support suppression of facts so as to justify invocation of the extended limitation period.

Conclusion: The issue was decided in favour of the assessee and the demand was held to be barred by limitation.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief according to law.

Ratio Decidendi: Structural items, cement and similar materials used to fabricate support structures integral to capital goods may qualify for CENVAT credit when the user test is satisfied, and the extended limitation period cannot be invoked in the absence of suppression where the assessee has already disclosed the relevant facts to the department.

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