CENVAT credit on welding electrodes and structural steel for machine support structures remained eligible under the user test.

CENVAT credit was treated as admissible on welding electrodes used for repair and maintenance, and on structural steel items such as MS angles, channels and TMT bars when used to fabricate support structures for capital goods in the factory. The later restrictive amendment to the definition of input was treated as prospective, so it did not govern the pre-amendment period. Applying the user test, items used in fabrication of machine support structures were regarded as part of the capital goods and eligible for credit, while materials used for factory sheds or foundations were distinguished on the facts.

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Issues: Whether CENVAT credit was admissible on welding electrodes and on structural steel items such as MS angles, channels and TMT bars used in the fabrication of support structures for capital goods.

Analysis: The dispute related to the pre-amendment period, and the later amendment to the definition of input was held to be prospective. Welding electrodes used in repair and maintenance had already been recognised in precedent as eligible inputs. For structural steel items, the applicable approach was the user test: where such items are used to fabricate support structures for capital goods that are used in the factory, they are treated as part of the capital goods and fall within the scope of credit eligibility. The decisions relied upon also distinguished between use in construction of factory sheds or foundations and use in fabrication of support structures for machines, holding only the latter eligible on the facts considered.

Conclusion: CENVAT credit on welding electrodes and on structural steel items used for fabrication of support structures for capital goods was held admissible, and the denial of credit was unsustainable.

Final Conclusion: The impugned orders were set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: For the relevant period, goods used as inputs in the fabrication of support structures for capital goods, and welding electrodes used in their repair or maintenance, are credit-eligible where the user test is satisfied and a later restrictive amendment is prospective only.

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