CENVAT credit on steel used for machinery support upheld; non-retrospective amendment could not deny earlier-period credit.

Steel items such as joists, channels, plates, angles and bars used to fabricate structural support integral to machinery were treated as eligible for CENVAT credit, because the support was regarded as part of the machinery for credit purposes under the user test. The Tribunal also noted that the amendment relied on by the lower authorities through Notification No. 61/2009-CE (N.T.) could not be applied retrospectively to deny credit for the disputed period. On that basis, the prior denial of credit was unsustainable and the assessee succeeded.

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Issues: (i) Whether steel items such as joists, channels, plates, angles and bars used for fabrication of structural support for machinery qualify for CENVAT credit as capital goods or components thereof. (ii) Whether the amendment relied upon by the lower authorities through Notification No. 61/2009-CE (N.T.) dated 07.07.2009 could be applied retrospectively to deny credit for the disputed period.

Issue (i): Whether steel items such as joists, channels, plates, angles and bars used for fabrication of structural support for machinery qualify for CENVAT credit as capital goods or components thereof.

Analysis: The lower authorities had proceeded on the basis of the Larger Bench view in Vandana Global Ltd., but that view was no longer sustainable in light of later High Court and Supreme Court authority. Applying the user test, the Tribunal treated the machinery and its structural support as interconnected, and held that structural support integral to machinery is part of the machinery for credit purposes. Steel items used for fabricating such support therefore fall within the scope of capital goods for availing credit under the CENVAT Credit Rules, 2004.

Conclusion: The issue is decided in favour of the assessee.

Issue (ii): Whether the amendment relied upon by the lower authorities through Notification No. 61/2009-CE (N.T.) dated 07.07.2009 could be applied retrospectively to deny credit for the disputed period.

Analysis: The reasoning adopted by the lower authorities depended on the amending notification, but the Tribunal accepted that the amendment was not retrospective in operation for the period in dispute. The earlier contrary view used to sustain denial of credit could not be applied once the subsequent legal position was taken into account.

Conclusion: The amendment could not be applied retrospectively against the assessee.

Final Conclusion: The impugned orders were unsustainable and the credit denial failed, resulting in allowance of the appeal with consequential relief in accordance with law.

Ratio Decidendi: Steel items used to fabricate structural support that is integral to machinery are eligible for CENVAT credit, and an amendment not made retrospective cannot be used to deny credit for an earlier period.

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