CENVAT credit on structural steel for capital goods support structures is admissible; interest is not payable after pre-utilisation reversal.

CENVAT credit is admissible on iron and steel structural items such as M.S. plates, angles and channels when they are used to fabricate support structures necessary for installation and functioning of capital goods; applying the user test, such fabricated structures are treated as parts of the machinery, and a later amendment was not regarded as clarificatory enough to deny credit retrospectively. Interest is not payable on wrongly availed CENVAT credit on cement used for civil foundation work where the credit is reversed before utilisation. The stated result is that the credit disallowance and interest demand were unsustainable.

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Issues: (i) Whether CENVAT credit was admissible on iron and steel structural items such as M.S. plates, angles and channels used in fabricating support structures for capital goods. (ii) Whether interest was payable on CENVAT credit taken on cement used for civil foundation work, where the credit was reversed before utilisation.

Issue (i): Whether CENVAT credit was admissible on iron and steel structural items such as M.S. plates, angles and channels used in fabricating support structures for capital goods.

Analysis: The structural items were used for fabrication of support structures necessary for installation and functioning of capital goods. Applying the user test, the fabricated structures were treated as parts of the machines and, therefore, as capital goods or eligible components thereof. The amendment relied upon by the Department was not treated as clarificatory so as to deny credit retrospectively.

Conclusion: CENVAT credit on the iron and steel structural items was admissible and the disallowance was unsustainable.

Issue (ii): Whether interest was payable on CENVAT credit taken on cement used for civil foundation work, where the credit was reversed before utilisation.

Analysis: Where credit is wrongly availed but reversed before being utilised, no interest liability arises. Since the credit on cement was reversed before utilisation, the demand for interest could not be sustained.

Conclusion: No interest was payable on the reversed credit.

Final Conclusion: Both appeals succeeded and the impugned orders were set aside, resulting in full relief to the assessee.

Ratio Decidendi: Structural steel used to fabricate support structures for capital goods is eligible for CENVAT credit when it satisfies the user test, and interest is not payable on wrongly availed credit that is reversed before utilisation.

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