Cenvat credit on rented premises used for manufacture remains admissible despite later factory registration inclusion

Cenvat credit on service tax paid for rent of premises used for storage and factory-related activity was held admissible even for the period before that premises was included in the registered factory. The decisive factor was the direct or indirect nexus of the service with manufacture or business activity, not the formal inclusion of the premises in factory registration. Because the premises was functionally connected to manufacturing, denial of credit solely on registration grounds was unsustainable, and the related demand, interest, and penalties could not stand.

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Issues: Whether Cenvat credit of service tax paid on rent for premises used for storage and factory-related activity is admissible for the period prior to inclusion of that premises in the registered factory premises.

Analysis: The premises was used in connection with the manufacturing activity, including storage of goods, and the Revenue itself allowed credit after the premises was added to the registration. The mere fact that the premises was not included in the registered factory premises during the earlier period did not change its functional use in relation to manufacture. Service, unlike tangible inputs or capital goods, is not confined to the four corners of the factory, and credit is admissible when the service is received directly or indirectly in relation to manufacture or business activity.

Conclusion: Cenvat credit could not be denied solely because the rented premises had not yet been included in the factory registration; the credit was admissible.

Final Conclusion: The denial of credit and the consequential demand, interest, and penalties were unsustainable, and the appeal succeeded.

Ratio Decidendi: Cenvat credit on services is admissible where the service has a direct or indirect nexus with manufacture or business activity, and its availability does not depend merely on whether the premises used for such activity is separately included in the factory registration.

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