CENVAT credit on welding electrodes and structural steel for support structures was upheld under the user test and prospective amendment analysis.

Welding electrodes used in the factory were treated as eligible CENVAT inputs for repair, maintenance and manufacturing use, and credit was allowed. Structural steel items such as MS angles, channels and TMT bars used to fabricate support structures for capital goods were also held eligible, because the 07.07.2009 amendment to the definition of "input" was treated as prospective and the user test was satisfied for the relevant period. On that basis, disallowance of credit, along with the consequential demand and penalty, could not be sustained and the assessee's appeal succeeded.

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

Issue (i): Whether CENVAT credit was admissible on welding electrodes used in the factory.

Analysis: Welding electrodes used for repair and maintenance or for use in the factory were treated as eligible inputs. The Tribunal relied on earlier decisions recognising that such goods could qualify within the expression "input" under the CENVAT scheme.

Conclusion: Credit on welding electrodes was held admissible in favour of the assessee.

Issue (ii): Whether CENVAT credit was admissible on structural steel items such as MS angles, channels, TMT bars and similar items used for fabrication of support structures for capital goods.

Analysis: For the disputed period, the amendment to the definition of "input" made on 07.07.2009 was treated as prospective and not retrospective. Applying the user test, the structural items used to fabricate support structures for capital goods were regarded as falling within the ambit of capital goods or inputs eligible for credit, particularly where they were used as integral supports for machinery and plant. The contrary view denying credit on such items was not accepted for the relevant period.

Conclusion: Credit on the structural steel items was held admissible in favour of the assessee.

Final Conclusion: The disallowance of credit and the consequential demand and penalty could not be sustained, and the assessee's appeal succeeded.

Ratio Decidendi: For the pre-amendment period, structural steel items used in fabrication of support structures for capital goods, and welding electrodes used in the factory, are eligible for CENVAT credit where the user test is satisfied and the amendment excluding such items is prospective.

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