User test for capital goods credit upheld for steel items used in fabrication of pollution-control equipment.

Steel plates and M.S. channels used to fabricate and install pollution-control equipment in the manufacturing premises were treated as capital goods for Cenvat credit purposes because the items satisfied the Supreme Court's user test and were put to a qualifying functional use integral to the manufacturing process and compliance requirements. On that basis, credit was held admissible and denial of credit was unsustainable.

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Issues: Whether steel items used for fabrication and installation of air pollution equipment in the manufacturing premises qualify for Cenvat credit as capital goods.

Analysis: The Tribunal applied the Supreme Court's user test for determining whether an item is capital goods. It noted that steel plates and M.S. channels used in fabrication of pollution-control equipment are required for equipment integral to the manufacturing process and to compliance with pollution-control requirements. On that basis, such items fall within the ambit of capital goods for credit purposes.

Conclusion: The steel items were eligible for Cenvat credit, and the denial of credit was unsustainable.

Ratio Decidendi: Items used in the fabrication of plant or equipment that are integral to the manufacturing process and are put to a qualifying functional use are to be treated as capital goods for credit entitlement.

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