Cenvat credit on structural steel for capital goods support structures was allowed under the user test.

Steel items used within the factory for fabrication of support structures and accessories of capital goods satisfied the user test under the Cenvat credit scheme. Where such items were employed for blower structures, wagon loading system upgrades and packing plant machinery support, they were treated as falling within capital goods or their components, spares and accessories under Rule 2(a) of the Cenvat Credit Rules, 2004. The contrary approach based on Vandana Global was held unsustainable in light of later judicial authority, and Cenvat credit was admissible.

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Issues: Whether Cenvat credit was admissible on steel items used for fabrication of support structures and accessories of capital goods inside the factory.

Analysis: The steel items were recorded as having been used for structures of blower at fly ash storage silo and for upgradation of wagon loading system and machine at the packing plant. Such use was held to be in aid of capital goods and their essential accessories. The settled principle is that where structural items are used in fabrication of capital goods or their support structures within the manufacturing premises, the user test is satisfied and the items can fall within the ambit of capital goods or their components, spares and accessories under Rule 2(a) of the Cenvat Credit Rules, 2004. The contrary view based on Vandana Global was treated as not sustainable in the light of subsequent judicial authority.

Conclusion: Cenvat credit on the steel items was admissible and the disallowance was unsustainable.

Ratio Decidendi: Structural steel items used within the factory for fabrication of support structures essential for capital goods satisfy the user test and are eligible for credit as components, spares or accessories of capital goods under the Cenvat credit scheme.

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