CENVAT credit for factory canteen construction service allowed where the canteen formed part of the factory premises.

CENVAT credit was held admissible on construction service used to build a canteen within the factory premises. The input service definition under Rule 2(1) of the Cenvat Credit Rules, 2004 was read to include services used in relation to setting up a factory, and the term factory was understood with reference to the entire area where manufacturing is carried on. Because the canteen was located inside the factory campus and providing it was a statutory requirement under the Factories Act, the service was treated as sufficiently connected with factory operations. Services indispensable to running the factory may qualify as input service even if not directly used in manufacture.

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Issues: Whether CENVAT credit was admissible on construction service used for constructing a canteen building within the factory premises as an input service.

Analysis: The definition of input service under Rule 2(1) of the Cenvat Credit Rules, 2004 includes services used in relation to setting up a factory and an office relating to such factory. The term factory was read in the light of Section 2(e) of the Central Excise Act, 1944, which covers the entire where manufacturing is carried on. The canteen was treated as part of the factory because it was within the factory campus and because providing a canteen is a statutory requirement under Section 46 of the Factories Act, 1948. The reasoning also noted that services indispensable to running the factory may fall within input service even if not directly used in manufacture.

Conclusion: Credit on construction service used for building the factory canteen was admissible and the issue was decided in favour of the assessee.

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