Cenvat credit for factory drain construction allowed as an input service linked to cleanliness and business activities.

Cenvat credit on service tax paid for constructing drains within and around factory premises was treated as admissible input service because the work maintained cleanliness, prevented water ingress, and related to a statutory factory obligation under the Factories Act. For the pre-amendment period, activities relating to business fell within the eligible scope, and the expenditure was also considered part of the cost of production. Following an earlier Tribunal ruling on identical facts, the denial of credit was held unsustainable and the assessee was entitled to the credit.

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Issues: Whether cenvat credit on service tax paid for construction of drains within the factory premises was admissible as input service when such work was undertaken to maintain cleanliness and prevent water from entering the factory.

Analysis: The service was used for constructing drains inside and around the factory, and the maintenance of a clean factory environment was treated as a statutory requirement under the Factories Act. The relevant period was prior to the amendment of the input service definition, when activities relating to business formed part of the eligible scope. The expenditure was also taken into account as a component of cost of production. In identical circumstances, credit had been allowed in an earlier Tribunal decision.

Conclusion: The denial of cenvat credit was held to be unsustainable, and the assessee was held entitled to the credit.

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