Cenvat credit on steel used for factory structures is allowed when the fabrication supports manufacturing operations.

Cenvat credit is treated as admissible where iron and steel are used within the factory to fabricate technological structures, staging, sheds, godowns and yards that support plant and machinery or otherwise serve manufacturing-related purposes. The later High Court view relied on in the text treats such inputs as eligible when the structures are integral to the manufacturing process, and it rejects denial based only on the earlier contrary Larger Bench approach. On that basis, credit denial is unsustainable, and penalties founded solely on such denial also do not survive.

---

---

Issues: Whether Cenvat credit was admissible on iron and steel used for fabrication of technological structures, staging, sheds, godowns and yards within the factory, and whether the penalties imposed were sustainable.

Analysis: The items in question were used inside the factory for fabrication and erection of structures that supported plant and machinery and for construction connected with manufacture. The decision followed later High Court rulings which held that steel and similar inputs used in fabrication of capital goods or structures integral to the manufacturing process are eligible for credit, and that the contrary view taken in the earlier Larger Bench ruling could not be applied to deny credit on these facts. Since the materials were used in the factory of production for manufacturing-related purposes, the credit denial was unsustainable. Once the credit denial failed, the penalties based on that denial also could not survive.

Conclusion: Cenvat credit was admissible on the disputed items, and the disallowance, appropriation and all penalties were set aside.

Final Conclusion: The appeals succeeded and the appellants obtained full relief on credit and penalty issues, with consequential benefits according to law.

Ratio Decidendi: Steel and similar inputs used for fabrication of structures integral to plant and machinery, or otherwise used in manufacturing-related fabrication within the factory, qualify for Cenvat credit and cannot be denied merely because they are employed in constructing supporting structures.

---