Input service credit for factory construction upheld where construction services were used to set up the manufacturing facility.

Service tax paid on commercial or industrial construction services used for setting up a factory falls within the definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004, because that provision expressly covers services used in relation to setting up, modernization, renovation or repairs of a factory. Denial of Cenvat credit on the ground that such services lacked nexus with manufacturing activity was therefore not sustainable. The credit was rightly allowed and the Revenue's challenge failed.

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Issues: Whether service tax paid on commercial or industrial construction services used for setting up a factory qualifies as input service for availment of Cenvat credit.

Analysis: Rule 2(l) of the Cenvat Credit Rules, 2004 includes services used in relation to setting up, modernization, renovation or repairs of a factory within the definition of input service. The construction services were used by the respondent for setting up its factory, and therefore fell within the statutory definition. In such circumstances, denial of credit on the ground of lack of nexus with manufacturing activity was not sustainable.

Conclusion: The Cenvat credit was rightly allowed and the Revenue's challenge failed.

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