CENVAT credit on support-structure steel for a captive power plant upheld under the functional nexus test.

CENVAT credit was held admissible on MS angles, bars and channels used in fabricating the support structure for a captive power plant and connected machinery. The applicable jurisdictional High Court precedent treated such steel items as eligible where they form an integral and necessary part of the composite installation and satisfy the functional nexus test. As the disputed materials were used for supporting the plant and machinery, denial of credit could not be sustained. The impugned denial was set aside and credit was allowed with consequential relief.

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Issues: Whether CENVAT credit was admissible on MS Angles, Bars and Channels used in the fabrication and support structure for the captive power plant and connected machinery.

Analysis: The credit dispute turned on whether the disputed steel items formed an integral and functional part of the power plant installation. The binding decision of the jurisdictional High Court held that such items, when used as part of the supporting and composite structure necessary for the plant and machinery to function, are eligible for credit. The same view had also been followed in the appellant's own earlier case. Applying that binding precedent and the functional nexus test, the denial of credit could not be sustained.

Conclusion: The appellant was held entitled to CENVAT credit on the disputed MS Angles, Bars and Channels.

Final Conclusion: The impugned denial of credit was set aside and the appeal was allowed with consequential relief in accordance with law.

Ratio Decidendi: Materials used as an integral and necessary part of the support structure for plant and machinery are eligible for CENVAT credit when they satisfy the functional nexus test and binding jurisdictional precedent.

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