CENVAT credit eligibility turns on actual use in manufacture, not mere classification, and technical denial was rejected.

CENVAT credit on MS plates, channels, MS rounds, TMT bars, lancing pipes and similar fabrication materials was held admissible because the decisive factor was their actual use in manufacture, not a purely technical classification under inputs or capital goods. For the period prior to 01.04.2011, eligibility under Rule 2(k) turned on deployment in the manufacturing process, and the user test was applied to goods used in relation to capital goods. The denial of credit could not be sustained where the factual findings on use were unrebutted, so the demand, interest and penalties did not survive.

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Issues: Whether CENVAT credit was admissible on the disputed items as inputs or capital goods under the CENVAT Credit Rules, 2004, and whether denial of credit could be sustained when the goods were shown to have been used in manufacture.

Analysis: The credit dispute concerned items such as MS plates, channels, MS rounds, TMT bars, lancing pipes and similar materials used in fabrication and manufacture. The earlier authority had recorded findings on actual deployment of the goods, and the Revenue did not contradict that factual matrix. Credit could not be denied merely because the goods were treated under one category when they were capable of admissibility under the other relevant category. For the period prior to 01.04.2011, the scope of Rule 2(k) of the CENVAT Credit Rules, 2004 had to be applied in light of the actual use of the goods, and the admissibility depended on their deployment in manufacture. The reasoning also applied the user test for determining eligibility of goods used in relation to capital goods and rejected a purely technical denial of credit.

Conclusion: The disputed goods were held eligible for CENVAT credit, and the Revenue's challenge failed.

Final Conclusion: The order allowing credit was sustained, with the resulting demand, interest and penalties not surviving.

Ratio Decidendi: CENVAT credit cannot be denied on a mere classification or technicality where the factual use of the goods establishes eligibility under the relevant rule governing inputs or capital goods.

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