CENVAT credit on structural steel used in capital goods fabrication upheld where support structures are integral to machinery function.

CENVAT credit on M.S. angles, channels, beams, plates, TMT bars and similar structural steel items used to fabricate capital goods and integral support structures was held admissible. Applying the user test, the Tribunal treated such items as part of the capital goods or their components, spares or accessories when they were essential to the functioning of the machinery. The denial of credit was therefore unsustainable, and the demand, interest and penalty were set aside.

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Issues: Whether CENVAT credit was admissible on M.S. angles, channels, beams, plates, TMT bars and similar items used in fabrication of capital goods and supporting structures.

Analysis: The dispute turned on whether the structural steel items, though not themselves capital goods, were used in the fabrication of machinery and support structures integral to the functioning of capital goods. Applying the user test and following the settled view that such fabricated items can form part of the relevant machines, the Tribunal held that the structural items used for support structures of capital goods fall within the ambit of capital goods for the purpose of credit. The prior view treating the amendment to the definition as clarificatory was not accepted in light of the later High Court and Supreme Court guidance relied upon in the order.

Conclusion: CENVAT credit on the structural items used in fabrication of capital goods and their supporting structures was admissible, and the denial of credit was unsustainable.

Final Conclusion: The demand, interest and penalty were set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Structural steel items used in the fabrication of capital goods or integral support structures are eligible for CENVAT credit when, on application of the user test, they form part of the capital goods or their components, spares or accessories.

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