Cenvat credit on foundations and support structures for capital goods allowed where materials are integral to installation and operation.

Cenvat credit was treated as admissible on cement and TMT bars used to lay foundations for machinery and other capital goods because such materials were integral to installation and functioning of the equipment. Credit was also allowed on structural steel used to fabricate support structures, as those structures were necessary for the installation and operation of the capital goods and were regarded as part of the capital goods or their components, spares, or accessories. The later amendment to the credit definition was treated as prospective, and the contrary earlier view was not followed. The stated ratio is that goods used in foundations or support structures functionally necessary for capital goods may qualify for Cenvat credit when they form an integral part of installation or operation.

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Issues: (i) Whether Cenvat credit was admissible on cement and TMT bars used in laying foundations for machinery and capital goods; (ii) Whether Cenvat credit was admissible on structural steel items used in fabrication of support structures for capital goods.

Issue (i): Whether Cenvat credit was admissible on cement and TMT bars used in laying foundations for machinery and capital goods.

Analysis: The credit was examined in the light of the settled position that materials used for construction of foundations for capital goods may qualify for credit when used integrally with the installation and functioning of such capital goods. Reliance was placed on earlier decisions allowing credit on cement used for capital goods-related foundations.

Conclusion: Cenvat credit on cement and TMT bars used in laying foundations was admissible.

Issue (ii): Whether Cenvat credit was admissible on structural steel items used in fabrication of support structures for capital goods.

Analysis: The credit on structural items was tested against the functional use of the goods and the user test applied in earlier authority. The Tribunal noted that support structures were necessary for the installation and operation of machinery and that structural steel used in such fabrication became part of the capital goods or their components, spares, or accessories. The later amendment to the credit definition was treated as prospective, and the prior contrary view was not followed.

Conclusion: Cenvat credit on structural steel items used for support structures was admissible.

Final Conclusion: The denial of credit was unsustainable, and the appellants were entitled to the benefit of Cenvat credit on the disputed items.

Ratio Decidendi: Goods used in the fabrication of foundations or support structures that are functionally necessary for capital goods may qualify for Cenvat credit when they form an integral part of the installation or operation of such capital goods, applying the user test and the definition of capital goods.

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