Cenvat credit on supporting steel and cement for plant and machinery accepted where installation and function depend on those components.

Steel and cement used for the foundation and support of kiln, cooler and chimney were held eligible for Cenvat credit as capital goods because they formed essential supporting parts without which the machinery could not be installed or function in manufacture. Items directly linked to plant and machinery were treated as part and parcel of the machine itself, while materials used for factory building construction were distinguished. The denial of credit on the steel and cement was set aside in favour of the assessee.

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Issues: Whether steel and cement used for the foundation and support of kiln, cooler and chimney were eligible for Cenvat credit as capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004.

Analysis: The disputed goods were used in constructing the supporting structure without which the capital goods could not be installed or put to use in manufacture. The decision followed the principle that iron and steel items used as essential parts and components of plant and machinery become part and parcel of the machine itself and are eligible for credit when they are directly linked with the machinery, though not when used for factory building construction. The contrary authorities were distinguished as either confined to different questions or not considering the direct issue of such items as components of specified capital goods.

Conclusion: The goods qualified for Cenvat credit as capital goods, and the denial of credit on steel and cement was set aside in favour of the assessee.

Ratio Decidendi: Goods used as essential supporting parts and components of plant and machinery, without which the machinery cannot be installed or function, qualify as capital goods for Cenvat credit.

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