Cenvat credit on factory construction and housekeeping services allowed where services fell within input service coverage and statutory compliance

Construction services used for office rooms within a factory premises were treated as eligible input services because Rule 2(1) of the Cenvat Credit Rules, 2004 then expressly covered services used in relation to setting up, renovation or repairs of a factory or an office relating to such factory. Housekeeping services for keeping the factory neat and clean were also held eligible because maintaining cleanliness was a statutory requirement under the Factories Act, 1948 and was integral to manufacturing operations. The stated effect is that both categories of service fell within the scope of Cenvat credit, and denial of credit on either ground was unsustainable.

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Issues: (i) Whether construction services used for constructing office rooms in the factory premises were eligible for Cenvat credit as input service; (ii) Whether housekeeping services used for keeping the factory premises neat and clean were eligible for Cenvat credit as input service.

Issue (i): Whether construction services used for constructing office rooms in the factory premises were eligible for Cenvat credit as input service.

Analysis: Rule 2(1) of the Cenvat Credit Rules, 2004 during the relevant period expressly included services used in relation to setting up, modernization, renovation or repairs of a factory, premises of a provider of output service, or an office relating to such factory or premises. The construction service was used for office rooms within the factory premises and therefore fell within the inclusive part of the definition.

Conclusion: Construction services were eligible for Cenvat credit and the finding against the assessee was unsustainable.

Issue (ii): Whether housekeeping services used for keeping the factory premises neat and clean were eligible for Cenvat credit as input service.

Analysis: Keeping the factory premises neat and clean was treated as a statutory requirement under Section 11 of the Factories Act, 1948. Compliance with that requirement was necessary for carrying on manufacturing operations, so the housekeeping service was regarded as a service used in or in relation to manufacture of the final product.

Conclusion: Housekeeping services were eligible for Cenvat credit and the denial of credit was not sustainable.

Final Conclusion: The denial of Cenvat credit on both services was set aside and the assessee succeeded in the appeal.

Ratio Decidendi: Services expressly covered by the inclusive definition of input service, and services required for statutory compliance integral to manufacturing operations, qualify for Cenvat credit.

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