Cenvat credit eligibility for fabrication goods, pre-production capital goods, and factory setup services upheld under the statutory definition.

Cenvat credit was discussed on three related questions: goods used to fabricate support structures for plant and machinery were treated as eligible capital goods credit where the user test showed they formed an integral part of effective machinery functioning; credit on duty-paid capital goods received for installation could not be denied merely because production had not yet commenced; and input services used for construction and setting up the factory fell within the inclusive definition of input service. The discussion concludes that credit is available where the statutory definition is satisfied, and it should not be refused on a purely technical or premature-production objection.

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Issues: (i) whether credit on goods used for fabrication of plant and machinery was admissible as capital goods credit; (ii) whether credit on capital goods could be denied on the ground that production had not commenced when the credit was taken; (iii) whether credit on input services used for construction and setting up of the factory was admissible.

Issue (i): Whether credit on goods used for fabrication of plant and machinery was admissible as capital goods credit.

Analysis: The goods were used in fabrication of support structures for plant and machinery inside the factory premises. The reasoning applied the user test to determine whether such structurals formed part of capital goods or their components, spares and accessories. Credit was held to be allowable where the fabricated items were integrally used for effective functioning of the machinery.

Conclusion: Credit on goods used for fabrication of plant and machinery was admissible, in favour of the assessee.

Issue (ii): Whether credit on capital goods could be denied on the ground that production had not commenced when the credit was taken.

Analysis: The capital goods were received duty paid in the assessee's premises for installation in the plant. The absence of commencement of production did not by itself bar availment of credit, because the scheme did not require waiting until final products were manufactured and clearance commenced. The objection based on immovability after installation and reliance on an inapposite circular were held unsustainable, since mere taking of credit in the books did not amount to impermissible utilization before production.

Conclusion: Credit on capital goods could not be denied merely because production had not commenced, in favour of the assessee.

Issue (iii): Whether credit on input services used for construction and setting up of the factory was admissible.

Analysis: The services in question were used for setting up the production factory and therefore fell within the inclusive scope of input service under the relevant definition, which covered services used directly or indirectly in relation to manufacture and specifically included services used in relation to setting up a factory. The contrary view based on a narrow reading of the definition and reliance on an unsuitable circular was rejected.

Conclusion: Credit on input services used for construction and setting up of the factory was admissible, in favour of the assessee.

Final Conclusion: The impugned denial of Cenvat credit on all three counts was unsustainable and the appeal succeeded.

Ratio Decidendi: For Cenvat credit purposes, goods used in fabrication of support structures for plant and machinery, capital goods received for installation before commencement of production, and services used for setting up a factory are eligible where they satisfy the statutory definition and the user test, and credit cannot be denied on a merely technical or premature-production objection.

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