CENVAT credit on structural steel and welding electrodes used for capital goods fabrication was allowed under the user test.

CENVAT credit was admissible on M.S. angles, channels, beams, plates, pipes and welding electrodes used to fabricate capital goods and their support structures in the factory. Applying the user test, the tribunal treated these structural steel items as integrally connected with the functioning of the machines, rather than as mere civil structures. It also held that the amendment relied on by the Revenue operated prospectively. The disputed goods, being used in fabrication of capital goods and their support structures, were therefore within the scope of capital goods for credit purposes, and credit was allowed in favour of the assessee.

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Issues: Whether CENVAT credit was admissible on M.S. angles, channels, beams, plates, pipes and welding electrodes used in fabrication of capital goods and support structures in the factory.

Analysis: The eligibility of credit turned on whether the goods used in fabrication could be treated as inputs or as parts/components of capital goods within the meaning of the CENVAT Credit Rules, 2004. Applying the user test, the structural steel items used for fabrication of support structures for capital goods were held to be integrally connected with the functioning of the machines and not mere civil structures. The amendment relied on by the Revenue was treated as prospective, while the goods used for fabrication of capital goods and their support structures were held to fall within the scope of capital goods for credit purposes.

Conclusion: CENVAT credit on the disputed steel items and welding electrodes used for fabrication of capital goods and their support structures was admissible in favour of the assessee.

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

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