Cenvat credit on structural steel used for capital goods fabrication remains admissible under the user test, with limited residual demand upheld.

Structural steel items such as angles, channels, joists, TMT bars and mill plates used to fabricate support structures and plant equipment were treated as eligible for Cenvat credit under the user test, because such items formed part of capital goods or their components. The post-07.07.2009 exclusion did not defeat credit where the materials were used in that manner, so denial of credit and consequential interest and penalty on the main disputed items could not stand. For the smaller residual amounts, however, the demand and interest were sustained for want of material to dislodge them, while penalty was set aside on one confirmed amount.

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Issues: (i) whether Cenvat credit was admissible on steel items such as angles, channels, joists, TMT bars and mill plates used in fabrication of support structures and plant equipment; (ii) whether the balance demand, interest and penalty on the remaining amounts could be sustained.

Issue (i): whether Cenvat credit was admissible on steel items such as angles, channels, joists, TMT bars and mill plates used in fabrication of support structures and plant equipment.

Analysis: The disputed items were used for fabrication of capital goods and related support structures, including items such as coal cyclones, chutes, coolers, vibrofeeders, crushers, bucket elevators, dust collectors, hoppers and silos. The applicable approach was the user test for determining whether fabricated goods form part of capital goods or their components. The Tribunal relied on the settled view that structural items used for support structures of capital goods fall within the ambit of capital goods for Cenvat purposes, and that the post-07.07.2009 exclusion did not dislodge credit where the items were so used.

Conclusion: Cenvat credit was admissible on the disputed structural items, and denial of credit with consequential interest and penalty could not be sustained.

Issue (ii): whether the balance demand, interest and penalty on the remaining amounts could be sustained.

Analysis: In respect of the smaller amounts, no adequate material was shown to rebut the confirmation of demand, and the record did not justify setting aside those components in full. The Tribunal sustained the demand and interest on those amounts, while finding no basis for penalty on one of the confirmed amounts.

Conclusion: The remaining demand and interest were sustained, but penalty on the amount of Rs. 49,248/- was set aside.

Final Conclusion: The appeal succeeded to the extent of denial of Cenvat credit on the main disputed items, while the residual demand and interest were upheld in part, with limited relief from penalty.

Ratio Decidendi: Structural steel items used in the fabrication of support structures for capital goods satisfy the user test and are eligible for Cenvat credit as components of capital goods under the applicable credit rules.

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