CENVAT credit on steel items used in fabricating capital goods and integral support structures was upheld under the user test.

CENVAT credit on iron and steel items used inside the factory was allowed where the items were employed in fabricating capital goods, their parts, components, accessories, or integral support structures for sponge iron manufacture. The Tribunal applied the user test and accepted the factual material, including chartered engineer certification, showing use in the capital goods stream. In the absence of contrary material proving that the items were only general structural supports outside that stream, credit could not be denied merely because they also served as support structures. The Revenue's challenge therefore failed.

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Issues: Whether CENVAT credit was admissible on iron and steel items used in fabrication of capital goods and support structures within the factory for manufacture of sponge iron.

Analysis: The credit dispute turned on whether items such as plates, sheets, channels and electrodes were used merely as structural supports or were employed in the fabrication of identifiable capital goods, parts, components and accessories used in the manufacturing process. The lower appellate authority had accepted the factual material, including the chartered engineer's certification, and applied the user test. The Tribunal held that in the absence of contrary material showing that the items were only for support structure in a manner excluding them from the capital goods stream, the established principle of user test governed the issue. Reliance was placed on the settled approach that steel items used for fabrication of machinery or its supporting structures inside the factory can qualify for credit when they form part of the capital goods system.

Conclusion: CENVAT credit on the disputed iron and steel items was admissible and the Revenue's appeal failed.

Ratio Decidendi: Where iron and steel items are used in the fabrication of capital goods or their parts, components, accessories, or integral support structures within the factory, eligibility to CENVAT credit is to be determined by the user test, and such credit cannot be denied merely because the items also serve as structural supports.

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