CENVAT credit on fabrication inputs for capital goods upheld under the user test and broader component-use principle.

CENVAT credit was held admissible on iron and steel materials and other fabrication inputs used to make supporting structures for identifiable capital goods employed in manufacturing excisable goods. The Court applied the user test and accepted the concurrent finding that the disputed materials were used in fabrication of such capital goods, distinguishing the contrary Revenue authority on the ground that those materials there were not shown to form component parts of the machinery. A revenue circular supporting a broader understanding of components and accessories used in fabrication also supported the allowance of credit, and the departmental challenge failed.

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Issues: Whether CENVAT credit was admissible on iron and steel materials and other fabrication inputs used for making supporting structures of identifiable capital goods used in the manufacture of excisable goods.

Analysis: The appeals turned on the character of the disputed materials and their use in the factory. The record contained a concurrent factual finding that the iron and steel items were used in the fabrication of identifiable capital goods, and that those capital goods were in turn used for manufacture. The Court distinguished the contrary authority relied on by the Revenue on the basis that, on its facts, the materials there were not shown to form component parts of the finished machinery. The Court also relied on the principle that eligibility for credit depends on the user test and on the revenue circular supporting a broader understanding of components and accessories used for such fabrication.

Conclusion: CENVAT credit on the disputed fabrication inputs used for supporting structures of capital goods was admissible, and the Revenue's challenge failed.

Final Conclusion: The impugned orders allowing credit were sustained and the departmental appeals were rejected.

Ratio Decidendi: Where fabrication materials are proved to have been used for identifiable capital goods that are themselves employed in manufacturing excisable goods, CENVAT credit is allowable applying the user test.

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