Input service credit upheld for factory cleaning, cane handling, and cane development linked to sugar manufacture.

Under Rule 2(l) of the Cenvat Credit Rules, 2004, manpower supply services used for cleaning the factory yard, weighment and unloading of sugar cane, and cane area survey and sugar cane development were treated as input services because they were integrally connected with the manufacturing business. Yard cleaning was linked to the statutory duty to keep the factory neat and clean under the Factories Act; weighment and unloading were connected with procurement of inputs for sugar and molasses manufacture; and cane area survey and development had a direct nexus with securing quality cane and proper recovery. Cenvat credit was therefore admissible, and the denial of credit, interest, and penalty was unsustainable.

---

---

Issues: Whether Cenvat credit was admissible on manpower supply services used for yard cleaning within the factory, weighment and unloading of sugar cane at the factory, and cane area survey and sugar cane development.

Analysis: Cleaning of the factory yard was held to be an activity required by the statutory obligation to keep factory neat and clean under the Factories Act, and therefore to be in or in relation to manufacture of the final product. Weighment and unloading of sugar cane at the factory were treated as activities relating to procurement of inputs and connected with manufacture of sugar and molasses. Cane area survey and sugar cane development were found to have nexus with the business of manufacture of sugar, since supply of good quality sugar cane with proper recovery is essential to that business. The wide definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004, including activities relating to business, was applied to hold that services integrally connected with the manufacturing business qualify for credit.

Conclusion: Cenvat credit on all the disputed manpower supply services was admissible and the denial of credit, interest, and penalty was unsustainable.

---